Why 90% of investors lose money

Written by Aryan Agarwal

April 29, 2020

Has it ever happened that whenever you buy a particular stock, it immediately goes down in price?

I have had these kinds of moments and have heard many people say it happened to them as well. Some people start to believe hysterically that they are the reason stock goes down.

Hilarious right? Thank God that is not true; otherwise, people would have fought for people like them and paid them handsomely.

Retail investors (people like you and me) indeed lose money in the market. To be quite honest, most of them do lose money.

It was found in a study that almost 90% of retail investors lose money in the stock market when they individually pick shares and invest in them.

So, let us learn why people lose money in the stock market by discussing these 12 points.

The 12 reasons investors lose money in stock market

Lack of proper Knowledge

There is a common saying, ‘First, learn then start to earn.’ This is true everywhere, but in our case, it is incredibly relevant in the stock market.

You need to know the risks involved, know how the share market work, know what are shares, and multiple other things as well.

A lot of things need to be learned before investing, but most people skip that and try to ‘invest’ based on their luck. This turns to invest more in gambling, thus losing money and blaming the market.

Many investors consider the suggestions delivered by newspapers or analysts appearing on television. This is one of the biggest blunders you can make.

These guys don’t want to help you or anything. They are there either because they want media attention or worst, they want you to buy the shares they are selling.

Always do your own research about a company if you are listening to some analyst’s advice and at least check the debt ratio, P/E, CAGR (compounded annual growth rate), compounded sales growth, etc.

You can learn all about the stock market and its working on the Zerodha platform Varsity for free.

Lack of patience

Maket Cycle and why to avoid timing the market.
Wait till the market reaches till dispair region to buy stocks

“Patience is a virtue”. I am sure you must have heard this.

Indeed, it is.

If you would do research into a particular share and like it based on your personal criteria, you shouldn’t immediately buy it.

You should calculate its fair price and wait to buy it then. If you are familiar with value investing, you should buy it at its MOS (Margin Of Safety) price, which is generally 50% of the fair price.

This MOS is there so that even if you made an error in calculating the fair price, you would have to be considered wrong.

Want to get rich ‘Quick.’

Everyone and I mean everyone wants to be rich.

I get it, it’s a basic human instinct to want the money that everyone desires to get rich as quickly as possible.

Many people turn to the stock market for a quick buck, but as mentioned earlier, it’s gambling if you don’t know what you are doing and why.

You should not put your money due to excitement without worrying about the consequences. It is needless to say that your money will be wasted.

People enter the share market to buy shares of a multi-bagger (share that will rise 5-10 times of the present value). Instead, they end up losing money.

Then these people tend to blame the stock market that it’s a waste of time and money.

Letting emotions guide their decisions

This is one of the biggest reasons that investors lose money.

Human nature suggests that when a stock is going up, way past its fair value and you know it will fall, you try to wait to lock in the highest point and most of the times end up selling the stock for way less than you could have sold it for.

Same way, when a stock goes down in price, way below its fair price, instead of buying more of the share, you sell it on the fear of losing your money.

This is the main reason that nowadays bots are taking over the stock markets.

If you can let go of your emotions and think logically, you will be way ahead of other people.

Not letting emotions guide you is one of the hardest things ever, because even if you think you can do it when the time comes, it will be so difficult for you.

Selling good shares too early and holding bad shares for too long

Whenever a stock price goes up, a retail investor either quickly locks in the gain or hold it too long because of greed and doesn’t sell fast enough. When the stock price goes down, a retail investor doesn’t sell the stock, hoping to get at least some profit out of it later down the line.

This causes them to hold bad shares that are giving you a loss and might be fundamentally bad and selling those that were good companies with a strong fundamental very fast.

This makes retail ‘investors’ not by choice but by necessity, as most people try to start with trading.

People getting tricked by scammers

People often get scammed by scammers. If you are a victim, there is nothing to be embarrassed about. It can happen to anyone of us.

Very often, as investors, you may receive certain phone calls text messages or emails from unknown sources.

They might claim that they can grow your money at an astronomical rate of return or have some insider information about a publicly-traded company and will ask for money in return for this kind of information.

They try to lure you in with saying that the investment will double and by using the names of blue-chip stocks to build up your trust.

Never share your personal details with people behind these calls and never give them money for any purpose.

Herd mentality


When a ‘HOT’ stock is talked about by other people a lot, like a friend, people don’t think to analyze it or calculate its fair value and put their hard-earned money into that ‘HOT’ stock, they inevitably lose money because of the reasons we talked earlier,

I am sorry, but I keep coming back to the same point again and again. Never make decisions in the stock market based on other people’s opinion and agendas.

You never know what they have to gain, and you have to lose.

Do not follow other people just because they are buying into a stock. Research first, and if you come to the same conclusion, they do buy.

People get tempted by the idea of Marginal Trading

You can get more stocks than you can actually afford to buy by a simple strategy called Margin Trading. Margin trading is essentially like taking a loan from the broker and placing an order to buy a share.

Gains from this kind of trading is massive as you get to keep all the profits from the shares except a small fee charged by the broker.

For example, you have ₹ 500. Your broker might let you buy shares worth ₹ 5000. If your stock position increases by 1%, you get a profit of 5000*1%= 500.

So, your total profit from the trade will be ₹500 minus a charge from your broker of say ₹50.

Your total net profit will then be ₹450, that is a profit of 90% on your original ₹500.

This is the benefit of using margin trading, but it can go horribly wrong.

Using this example above, imagine the stock falls 2% from your buying position. That is ₹1000 already plus fees.

Instead of making money, you lost double of that, and you need to pay that money to your broker.

So, try to avoid Margin trading altogether.

Following the advice of others.

Maximum investors, while buying shares, do not do a fundamental analysis or technical analysis.

Many business channels show intraday trading tips that are given by professional analysts. Investors try to follow these tips that keep on coming all day long(9-3:30) and get amazed by a few of the trades that do turn out to be accurate.

Generally, these analysts give a buy signal when the market is already up and give sell signals when the market is down. These things may work sometimes but not always.

You need to remember; these professional analysts aren’t a god that knows what is about to happen next.

Most of the times, these analysts are getting paid by the companies to give you ‘BUY’ signals of their shares.

Avoid This.

Investment with borrowed money

When the stock market is going up and making all-time highs daily, that’s when retail investors jump in the market wanted to make a quick buck as they are in the impression that the market will keep on going up forever.

This is the time when smart investors are leaving the market by booking their profits and selling their shares to these investors.

If making loses wasn’t enough for these investors, they borrow money from others to increase their profits and end up losing both their money and someone’s else money as well.

This puts them in DEBT and makes their lives miserable. You should not make this mistake and try to avoid putting other people’s money in the stock market.

Judging a share with its price rather than value

warren buffet said,"price is what you pay, value is what you get"

This quote by Mr Warren Buffet is so accurate.

Investors often forget that a share is an underlying asset whose value comes from the business that the company runs and not the other way around.

The market goes crazy sometimes when it values certain stocks way above their fair value and sometimes way below their fair value.

While one ruin you, the other can make you extremely wealthy.

Trying to time the market

According to the famed investor and author, Benjamin Graham wrote ‘You can’t predict Market’ in his book ‘The Intelligent Investor‘.

Ben Graham was the teacher and mentor of Mr Warren Buffet, considered to be the best value investor of all time, while Ben Graham is considered to be the father of value investing.

When you try to time the market, you either miss out on the potential gains or lose money because you bought at too high. Timing is the market is impossible and stay away from anyone who says otherwise. This is a universally accepted fact.


Investing can be a daunting thing to do.

If you learn about the stock market investing, I guarantee that you can avoid at least half the mistake that most people do.

Isn’t that a good enough incentive for you to go out there and try. You need even earn some money while learning new things and staying ahead of the curve.

Let me know what you decide to do?

If you decide to learn about the stock market, comment ‘YES’ down below.

I would really appreciate it.

Frequently Asked Questions(FAQ)

How to avoid loss in the stock market

You need to learn about investing before diving into the stock market. learning about the stock market and implementing it will make the biggest difference for you.

Can I get rich quick through the stock market?

Absolutely, not. You cannot think of the stock market as gambling. If you learn about it and pick some good shares, you can get rich in a couple of years.

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