Why Do People Lose Money on Stocks?

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It’s no secret, investing in the stock market can be very lucrative if done right. The problem is there are so many people out there that do it wrong. Why? Because a lot of idiots oversimplify the process. Hate to break it to you, but no, you can’t just put money in and magically get millions out. It’s all about strategy. Making the right investments takes effort and research, but you also have to get the timing right, or you just may miss your mark.

While there are a ton of reasons that people end up losing money in the stock market, there are a few mistakes that will hit you the hardest: Poor Timing, Lack of Patience and Underestimation. These common mistakes have cost people millions, especially the inexperienced fools that believe that anyone can convert $100 into a million overnight.

Poor Timing

Ultimately, the basis of the stock market game is timing. If you can’t get this right, you will fail. You have to be able to “read the room.” If you happen to catch a good stock at a low price, the first thing you need to ask yourself is why is this stock currently so low? There are a few reasons that stock prices can be low. Maybe it’s a new company that can end up being a rising star. Or maybe the stock is in the midst of a downward spiral. This is where the research comes in. Is this company something that will be of importance in the future, or has it’s time come and go? And possibly even more important than the time that you buy in is the time at which you sell. You don’t want to sell too fast or you just may miss out on a sudden turn around, but you also can’t wait too long to sell or else the stocks may plummet. And in some cases, your stock may be holding steady or making small increases, but they may take so long that you would do better to take the loss and make the money back faster with other investments of the remaining money. Regardless, you have to think quickly, yet be wise and make the decision that is in your best logical interest versus getting caught up in how you feel about things.

Lack of Patience

Sadly, there are so many idiots out there looking to make a quick buck that they don’t have the patience to make real millions in the stock market. They buy a stock today and are ready to sell tomorrow because they didn’t see an increase. Fear and greed are the primary psychological motivators behind many transactions on the stock market. So, it’s no surprise that a lot of people get scared and pull out of their investments too early to find out later that this was a million-dollar mistake. The stock market isn’t some rich quick scheme. However, it is a space where you can build real wealth over time. Therefore, if you want to see real gains, it’s worth picking the right stock and holding on to it, especially if you can find a great stock that provides regular dividend earnings as well.

Underestimation

On the flip side and perhaps the most common mistake is underestimating just how low a stock can go. A lot of uninformed idiots think “These stocks can’t go any lower!” Newsflash, it most certainly can and will. If your stock is rapidly trending downward, cut your losses and move on! This is another reason why it is important to do your research beforehand. You have to understand the circumstances around the stock before buying it because it is possible that the stock price will drop some time after you buy it and never rise back again to the price at which you bought it. Even if the stock has done particularly well in the past, the way the world is moving may not permit success for that particular stock in the future. The fact of the matter is that some stocks never rebound. Don’t get stuck riding the stock all the way to the bottom.

All In all, if you want to avoid these mistakes, there are two important trends to remember:

Buy low and Sell high. While it seems simple enough, many people panic with market trends and tend to overreact. There’s no sure way to perfectly time the market, but it helps if you do the research and keep up with current events that could affect the market. Try your best to make wise decisions with your timing and avoid being the idiot that buys long after the bottom and sells long after the top has peaked and dropped.

Secondly, avoid falling into the Sunk Cost Fallacy. This is the idea that if you lose money on a stock, rather than looking forward, people look backwards. Don’t be stupid and hold on to try to wait years for the recovery that’s never going to happen. Instead, put your funds in a different stock that may have a better future outlook from the present time.

At the end of the day, stock markets for the majority of retail investors cater to the emotion in people, but you can’t let your emotions drive your decisions. Instead use this to your advantage to help you make educated predictions and take calculated risks. But, keep in mind that investing in the stock market is just that, a risk. Stock prices don’t always go up and that’s ok. Just be wise and know when to let it go. While the market generally does well over a long time period, timing is everything and will vary over a few days/weeks/months/years. Therefore, you have to do your part and figure out which stocks will be valuable in the time frame that you would like to keep them. Not every stock is meant to be kept for long term investment and not every stock is meant for short term returns. Ultimately, It is up to you to decide what is best for your investment goals. Regardless of what you decide, there is one thing that you should takeaway…avoid the 3 fatal mistakes above and you’re likely to do just fine.

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Facts About Hedge Funds That Will Blow Your Mind

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Sure, hedge fund groups are seemingly wonderful. I mean, isn’t it great to have investors pool their money to help businesses grow and thrive. While this is very true, hedge funds have done some awesome things for the business industry and investors, it’s important to remember one thing. Everything that glitters isn’t gold and I’m here to tell you just as there are many good things about hedge funds, there is also a bit of a dark side to the game. There are a lot of things that happen behind the scenes that you would never know unless you’re thrown in the midst of it. And of course, unless you are a successful, accredited investor, you wouldn’t even have the chance to hop in. But take it from someone who has been an investor for decades, there are things that go on that will truly shock you. Check out these 4 surprising facts that you didn’t know about hedge funds:

  1. Hedge funds struggle to make money for their investors: While any investment comes with risk, they usually yield high rewards at the end. Well hedge fund investors can’t always say the same. Compared against the US Investor Index, hedge funds are clearly underperforming. Not to mention, once all of the fees are taken out, investors are left with little to no returns. This leads hedge funds to look into creative ways to supplement struggling returns. For instance, several hedge funds literally invest in the life insurance claims of others, hoping they’ll die early so they can collect or they may specialize in purchasing the claims of bankrupt companies or private partnerships so that they can collect as the trustee located more money for the victims.
  2. Hedge funds use their money and resources to fight political battles: It’s not uncommon for hedge funds to get involved in foreign politics. For instance, some of the largest hedge funds in the world (including Och-Ziff, Blackrock, and GLG) financed Zimbabwean despot, Robert Mugabe’s, violent election coup in exchange for mining rights back in the early 2000’s. Also, Elliot management and several other funds have fought relentlessly with the government of Argentina over the Argentine debt default of 2001. They even went as far as forcing an Argentine Naval vessel to be detained in a port in Ghana until debts were repaid.
  3. Hedge funds fraud activism: Believe it or not, a lot of hedge funds have been activists in cleaning up the business industry’s fraud. There have been several who specialize in finding and exposing fraudulent companies. A few funds made names for themselves by exposing and shorting dozens of fraudulent Chinese securities over the past decade. But perhaps the most shocking turn of events was when the “World’s Largest Hedge Fund” was exposed for its own fraud. Harry Markopolos, an executive at a major Boston options-trading firm tried to blow the whistle on Bernie Madoff and his hedge fund numerous times yet no one would listen. Years later, after incurring over 65 billion dollars in fraudulent transactions, Madoff’s fraud blew up because he couldn’t meet redemption requests, not because of regulatory action.
  4. Hedge funds have become very invested in gambling: Hedge fund sport-betting has become more of a common practice. Why has this become so attractive to hedge funds? Two reasons, (a) there is a positive expectancy and (b) it is completely uncorrelated to the market. Your pocket aces don’t care whether China slashed GDP forecasts.Now you know….
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The Big 5 Breakdown

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The Big 5 tech giants have stormed the world, creating huge developments in the way we live our everyday lives. But, recently the way that they do business has come under question by the government, leaving the breakdown of these companies inevitable.

Just to be clear, when I say the Big 5, I mean Facebook, Apple, Microsoft, Amazon and the beloved Google. While it’s undeniable that each of these companies have revolutionized our everyday lives, it has become more evident that these companies haven’t done everything right. These powerhouse companies have gone on to purposefully shut out the competition through monopolizing industries and even data breaching to propel themselves forward. Clearly this is not the right way to do business and their corrupt way of doing business must be stopped. So let’s take a deep dive into how these companies have flushed their industries with corruption, leading the government to step in and investigate further.

Monopolization

When you think of the tech world, it’s no surprise that these trillion dollar companies are at the top of the list. But have you ever wondered why other companies just can’t seem to compete? No, it’s not because these tech companies are just so unique and essential to our lives. It is because they have done everything possible to shut out the competition. Each of these companies display anti-competitive motives in some way shape or form. Take Amazon for instance, they have monopolized the e-commerce industry by building a system that allows them to store goods, accept virtual payments and deliver goods. It may seem innocent at first glance, but this way of doing business is actually not allowed. Why? Because Amazon has taken two separate industries, logistics and ecommerce, and used the fact that they are good at one to monopolize the other.

Facebook has also taken an anti-competitive approach. However, their way of doing things has been a bit more obvious. Any service that seems to offer some sort of competition, they hunt down and take them out through the infamous buyout method. We have seen it time and time again. They have bought out companies such as Instagram, What’s app, Nextdoor, Messenger and many more. Not to mention, Mark Zuckerberg is known to blatantly steal ideas from other companies and integrate them into his own services. Snapchat was a prime example of this, It was proven that Zuckerberg threatened to clone Snapchat if Evan Spiegel (the owner of Snapchat) did not sell it to him. And indeed, Zuckerberg made good on his threat, releasing Instagram “stories,” which is cooingly similar to Snapchat.

And let’s not forget Microsoft and BIll Gates, who was charged with anti-competitive behavior back in the 80’s and 90’s for acts of monopolizing the internet industry. For instance, having Internet Explorer as the default browser on all Windows products.

Data Breaching

Another way these tech giants have illegally propelled themselves to massive success is through data breaching. That’s right as a consumer, your data has not been safe in the hands of these tech companies. Take Google for instance. Google has been known to collect your data, whether it be through collecting your information when you create one of their Google services accounts or compiling your Google searches into a file. They then go on to analyze it and then distribute it to other companies for their own capital gain.

Facebook has also done the same. The difference is, Facebook’s default option is to collect your data when you sign up. This upon first appearance seems standard, but Facebook then goes on to illegally send your data to another company called Cambridge Analytica. This company then distributes your information among other companies without your direct consent, which is illegal.

But perhaps the most evil data breach that we have seen comes from Amazon. They have a service called Amazon Web Services, which for many smaller companies seems like a practical service to use to help enhance their business. Amazon Web Services promises smaller companies the ability to catalogue their products and services data into Amazon’s larger database. For smaller companies this is a great opportunity to gain more exposure to a wider client base. Little do they know, this could be a fatal blow to their business. Why? Because Amazon secretly spies on the database and are fishing for gold. Once they find a company that they like, they are quick to create a competitive product or service, blowing the “little guys” out of the water once and for all.

I’m sure you can now understand why some of the business practices of the tech giants have come into question by the government. It’s one thing to build a powerhouse company, but it’s another to do it illegally and at the unknowing expense of others.

This is why I believe the Big 5 will not last for much longer. Eventually the government will have to interfere, and the breakdown of these companies will begin. Of, course these companies won’t be completely wiped out. But without the security blanket of blatant malpractice, they should brace themselves for the impact of stiff competition.

So, what do you think? Will the Big 5 remain the world’s top tier tech companies when the government steps in and put an end to their illegal anti-competitive methods or will this be the demise of the Big 5 era?

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