Anonymous asked in Business & FinanceInvesting · 2 months ago

How do people actually lose money in the stock market? ?

I am quite new to this so excuse me if this is a dumb question but how does one actually lose money in the stock market? Can't you just buy a share and hold onto it until it becomes profitable in long run? Why is there so much stigma around the stock market that people always lose money. I am not looking for a get rich quick scheme. I don't mind buying a good stock and holding onto it for 5-10 years. 

18 Answers

  • 1 month ago

    The biggest trick to being a successful investor is to switch your focus from the current account value to the amount of assets (shares) in your account.  When I invest in a stock I am hoping I never need to sell it. Sometimes I do, but rarely. I have an overweight of dividend growing stocks and like to determine my success more on the annual amount of income my portfolio  kicks off as opposed to the current account value (which is ephemeral and frankly overstated once you consider the impact of taxes).

  • Amy
    Lv 7
    2 months ago

    Sure, you could just refuse to ever sell a stock that lost value. But there's usually a better investment that you want to move your money into.

    Imagine that you buy a house and then it starts falling apart. You don't like to sell it at a loss, but what's the point of keeping it? It's never going to become profitable. You should sell the house at a loss and use that money to buy a smaller house that's in better repair.

    Some companies go bankrupt, and their stocks cease to exist. 

    Other stock prices just stay flat or grow slower than inflation, so they lose real value.

    There shouldn't be stigma against long term diversified investment. But where people really lose money is in transaction fees. You pay a broker for each trade, so frequent trading costs a lot. You pay a fund manager to actively pick stocks for you.

  • 2 months ago

    5-10 years isn't always long enough for it to become profitable. It could take 30 years or longer -- or the company could go out of business and the stock could become worthless and stay worthless forever.

  • 2 months ago

    It depends what you mean by a good stock. What do you think will be popular for investment in ten years? FANG may be busted up by then, what stocks would benefit from the SEC breaking apart the current monopolies?

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  • John
    Lv 6
    2 months ago

    "Can't you just buy a share and hold onto it until it becomes profitable in long run?"  That statement relies on an assumption that all stocks will eventually increase in value over the course of years.  That is simply not correct.  

  • 2 months ago

    Good question.   The problem is that sometimes,  stocks never recover.   When the Japanese market collapsed in the 1980's,  it was 20 years before even 'good' stocks returned to their previous values.  And .... sometimes,  a stock collapses to zero and becomes valueless.

  • 2 months ago

    You lose money by buying overvalued and oversold junk. 

  • F
    Lv 7
    2 months ago

    Easy. In general buying shares in companies who appear to be flying when in fact they are not making a profit or indeed not actually making anything. In the late 90 s we had the sitcom bubble where virtually any company that had any link however tenuous with the internet saw their share price soar to ridiculous levels. Then it all crashed ,companies with share prices of £20 or even £100s, saw them crash to a few pence per share , or even zero if they folded.

    Similar with banks in 2008, I sold some Lloyds shares for over £12 each in 2005, in 2008 they were worth 29p.

    I can see a similar thing coming with rjectric cars. Tesla according to share value , is the biggest car company in the world, even though they produce a tiny fraction of the likes of Toyota, VW or GM.

    Another start up , Nikola ( cheeky name ), hasn’t produced a single car, but the stock market values it at 5 x that if Ford . Crazy.

  • 2 months ago

    Stocks are a gamble. No one can predict if a stock will rise in value or fall--and if it falls enough, you can lose what you invest. You buy 5 shares of stock at $20 per share, and you will pay $100--a year later that stock is only worth $1 per share, you've lost $19 for every share you own. Your stock is now only worth $10 TOTAL. You've lost $90. It's pretty simple math. In addition, companies go out of business, or bankrupt all the time--and your stock becomes completely worthless. If you buy a product--for instance a chair--and it breaks beyond repair--you own nothing and have spent that money never to get it back. It's the same with stocks. 

    You cannot "count" on any stock, no matter how popular, secure or expensive, going UP in value. The value rises and falls with all stocks. Nothing is secure. 

  • 2 months ago

    Realize that for every person buying on the market there is another person selling on the market - so it follows that one person will lose money and one will gain money and that doesn't even count for the commissions of the trade.

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