People Started Leaving Stock Market
In the last couple of years, we have seen a lot of people start their journey in the Stock Market with the thought that they will be earning big and also started with an all-equity portfolio. I think this was all because the Stock Market was having its dream run after the Covif decline and people thought that this will continue forever. But bulls and bears are part and parcel of the stock market, and thus what goes up can go down significantly.
PC; Pixabay.com
People who have thought that it's easy to earn money because the market goes in only one direction are actually in negation because they have only seen the market going up in the last two years. Thye thought earning in the market seems to be easy and they cannot lose any money and the market will always go up. Now they are facing the heat because the market has started going down and people are losing money if they have not added stop losses. This is happening with a lot of new users now and they started leaving the market after suffering some losses.
But again leaving the market is not a solution because the market might have gone down today, but there is a possibility that it will surely go up in the future and thus we have to be patient to actually wait for that time to grab the opportunity to get that sweet returns. Now patiently waiting is good rather than leaving it altogether.
The problem I have seen people doing is chasing that next big thing which has already given 10X and thus started coming down. Most of the retail investors (I was once doing that, to be honest) do try to buy some stocks which are 52 weeks' high and started to come down thinking these stocks will never go down and end up losing a lot. When those stocks come down, we also try to average it out thinking we are buying the dip but that is so bad.
If a stock has given good returns and it is coming down doesn't mean it is a good stock, because big institutions might have started dumping the stock and the poor retail investors fell prey to that. The classic example is Yes Bank, it was called a multi-bagger but lost 95% of its value. What we have to think about before investing is that we have to buy a great business that can actually give that many returns over a long time instead of getting that many returns overnight.
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I agree with you, many people entered the markets in moments of euphoria, when everything seemed to be going up, believing that the trend would never reverse. For most people it is difficult to get used to the idea that everything that goes up can also go down, because the excess of optimism and greed in the markets blinds them; and also, because they are unaware or refuse to accept that bull and bear races are two normal market cycles that alternate continuously.
That excessive confidence in the belief that the trend could not be reversed is, as you said, what led many people not to put stop loss on their positions; but they also made the mistake of not taking profit when they still could. The frustration generated by losses is causing many people to abandon the markets, but as you well say, that is not the solution, because they are closed to the possibility of recovering what they lost in the future. At least that's how I see it.
For the rest, well, I think it's more profitable to be an investor than a trader, and that in all asset classes, but especially when it comes to shares in the stock market, because investing implies waiting in the long term, and because shares of companies that really have potential will increase in value over time, even if they are currently going through a rough patch.
Very good publication. Thanks for sharing. Greetings.
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