How to lose money in the stock market

If you want to lose your shirt in the stock market, it’s easy. There are many ways you can do it and whichever way you might choose, you won’t be alone.  

#1 Cause for losing money in the stock market: Riding Losers Lower

The obvious way to lose money is to hold a stock that is below your purchase price and continues to fall. Clearly that will erode your capital. The affect is compounded when the entire portfolio rides the stock market lower in a correction, or worse, the dreaded bear market. Mutual fund investors will remember the credit crisis in 2008-2009 when mutual funds suffered their worst performance in history. But wait, there’s more!  

It’s true the stock market goes down sometimes, but ultimately what underlies the damage to investor portfolios are the decisions investors make. Consider this;

The ability to change your mind, is one of the best traits a successful investor has!

Easy to say, but it’s another story to actually sell a stock you have a loss on. Here’s a strategy I developed to assist investors in this situation. Here’s how it works;

Sell the stock and immediately place an order at a lower price to buy the stock back. Subscribers use a template for determining what the buyback price is. The process may be repeated in the event of a deeper decline.  

Rather than attempt to erase the attachment to the stock, an investor stays focused on the stock, keeping it in play for them psychologically.

This strategy is quite effective for building profit from our screens for the stock market’s highest ranked stocks. By selling them early in pullbacks, the top ranked stocks are targeted for buys at a lower price. Using the template for establishing the new buy price, the number of shares in the buy order is increased by the percentage spread between the sell and buy price.  

Other tactics that don’t work in the financial markets will be addressed at another date.

 

Unbiased independent market analysis for investors who want to know what works in good and bad markets. Email info@investorbootcamponline.com for a promo code to set up a free subscription to the premier online investor research resource.

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