Markets

Why Most Investors Fail in the Stock Market

Throughout the past 30 days of wild volatility, here's what I didn't do.

Panic.

Worry.

Sell.

In fact, the best I did was add to a couple of positions Thursday.

The world was already in an uncertain state for the past three-plus years. It's just that, with the market rising, we pushed the issue to the backs of our minds and ignored it.

If you read Howard Marks ' ( Trades , Portfolio ) latest memo, " On the Couch ," he explains the problems and the psychology side better than I ever could.

But here's a quick summary of how to succeed in this market, and why most people fail.

Lack of emotional self-control is " Why Most Investors Fail in the Stock Market ," but I add other aspects in this article.

People who have failed will often try to blame the market when, in reality, most investment failures fall squarely on the investor.

This is nothing new. It's obvious.

It's so obvious and familiar that it's dangerous.

Familiarity is dangerous.

Say you go to the home of a friend who lives close to the airport. A plane flies by, and the sound of the jets is numbing.

Yet your friend doesn't notice.

"Didn't you hear that?" you ask.

"Hear what?" he replies.

That's what familiarity does to you if you aren't keeping up with people like Howard Marks ( Trades , Portfolio ) who poke at you in the right way.

You don't notice your bad habits and the obvious signs that you'll lose money.

People fail due to greed and speed

People whose vision is clouded by dollar signs and want to make a lot of money fast are setting themselves up for disappointment and failure.

Sure, they may get lucky here and there, but the combination of greed and speed is the complete opposite of the Old School Value approach where you use a methodical strategy and take a long haul attitude.

One of the advantages you hold over the professionals is to do the opposite of what the pros and traders do.

If they want to play the millisecond trade game, then go for monthly or yearly trades.

Don't play by their rules because you'll only lose.

Use time to your advantage.

Use their greed and

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This article first appeared on GuruFocus .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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