There is a saying in the stock market circle that if you have been feeling down about the losses you made, ask your friend about theirs.

Even though this joke has been going around for many decades, it is still relevant because there is no lack of individuals who lose money daily in the stock markets.

It is often believed that anywhere from 80 to 90 per cent of persons who invest capital in the stock market end up losing money. This includes both inexperienced and experienced traders.

Why Do Retail Investors Lose Money in the Stock Market?

Creating wealth over some time may be accomplished via the practice of investing in various financial markets. On the other hand, it has the propensity to experience a great deal of volatility in short to medium term, which may result in a decrease in the value of your stocks.

To succeed at investing, one must have a deep comprehension of the subject, extensive study, patience, and the capacity to handle volatility. A novice investor may find this challenging. They tend to be on the receiving end when the market goes down.

Investors who are new to the market and don’t have a firm grasp of market cycles frequently lose money. During the boom cycle, when the economy is expanding and firms report a tremendous profit increase, many new investors join the market.

As a result, retail investors frequently fail to recognize the end of the good times. During turbulent market situations, they frequently become stuck at higher levels, resulting in losses. During these times, one’s patience and faith in investing ideas are tested. Retail investors, on the other hand, frequently lack the fortitude to deal with this kind of volatility.

Top Mistakes That Retail Investors Make While Investing

The following information will give you the knowledge you need to understand why individuals lose money in the market and how you may recover from a loss in your portfolio.

Making financial investments in the stock market based on rumours and stock tips

If you’re starting in the stock market, you may be fooled into thinking that someone else’s stock advice is a reliable source of information. What if friends, family, and coworkers weren’t enough to give you stock advice in today’s internet environment?

As a result, stock advice on social media, WhatsApp groups, and business news channels are everywhere. 

To gain money, many self-declared experts and presenters urge us to purchase and sell stocks in real-time when we turn on a business news program.

But regrettably, it sets up a dangerous trap for unwary investors, who often assume that the continuous flow of stock recommendations is legitimate and invest based on it without fully comprehending the reality of the situation.

An excellent case study of the dangers of stock advice is Infibeam Avenues. An investor sell-off ensued when a WhatsApp message sent to a trading group caused a 71% drop in Infibeam Avenues’ stock price on September 28th, 2018, from around Rs. 197 to roughly Rs. 50.

Because the harm was so extensive, the company’s MD was forced to release a statement saying, “Some WhatsApp rumours went rounds in the market, and it produced fear among market players and investors at large.” Such stories, which are both false and motivated, are unequivocally discredited by our organization.

“Bad news is typically good news—for someone else,” as the old saying goes. It is 100% correct about the news we listen to regarding equities. Often, groups with questionable interests purposefully distributed a fake story via the media. These entities want the viewers to think that the news provides them a competitive advantage, so they disseminate the fabricated report.

Investing in penny stocks 

As their name implies, Penny stocks trade at shallow values, often ranging from the single digits to even lower numbers. Some investors find them appealing due to the cheap cost that they have to pay. On the other hand, investors often fail to see that price and value are two distinct concepts in this context.

Penny stocks have a minimum market capitalization, and very little information about these companies is accessible in the public domain. As a direct consequence of this, they are very vulnerable to fraudulent administration and poor financial management.

Putting your money into penny stocks is often equivalent to flushing it into the sink (if not done after proper research). Sadly, the painful experience of failure is how some investors learn this lesson.

Penny stocks like Prakash Steelage, Lanco Infratech, Gemini Communication, and Birla Power Solutions are excellent examples of companies responsible for losing 75–90% of the wealth of their investors.

Lack of patience when it comes to stock market investments

When investing for the long run, one of the most important traits you can have is patience. Those investors who are patient and know the importance of waiting will be rewarded, while those who are impatient will pay a high price.

Both the news and people’s emotions may have a short-term impact on the markets and the pricing of stocks. In addition, the performance of share markets may be affected in the near term by any economic, global, or political shifts.

On the other hand, throughout a more extended period, stock values are determined by the fundamentals of the company and the profits it generates.

This leads to a scenario known as “buying high and selling low,” in which investors purchase valuable equities at inflated prices but immediately sell them when a market decline becomes apparent.

To do the exact opposite of what they should be doing, which is to “buy cheap and sell high,” as the expression goes.

A failure to invest in fundamentally sound companies

Equities that are professionally well-managed and have a clear and stable business strategy are examples of fundamentally and technically good stocks.

Because of this, these businesses can endure any economic slump and are often among the first to rebound and excel when the economy revives.

In 2008, the stock market saw one of the most severe downturns in its history, which you may already be aware of. Many investors gave in to their fears and liquidated their holdings at steep discounts as if there was no tomorrow.

On the other hand, those who chose to maintain their investments were well rewarded as the market rebounded in less than twenty-four months. Just need to understand fundamental and technical analysis.

Again, the same thing occurred with the dramatic correction in March 2020, when indices dropped significantly following the appearance of the Covid-19 epidemic.

However, markets quickly bounced back, and in less than 11 months, Indian indices reached fresh all-time highs for the first time.


As you can see, there are a variety of factors that contribute to the financial losses that retail investors in the stock market experience. Forget about making a profit; most even end up losing all of their initial investment and then trying to blame the market for their bad luck.

Having success in equities investing does not need rocket science. It all comes down to making smart investments, having patience, and avoiding financially detrimental errors.

Author Bio 

I am Rohit Srivastava, Founder of IndiaCharts, and I have more than 18 years of experience working at Sharekhan as a Fund manager.

In Dec 2019, I Launched the Indiacharts Mentorship Program, the most comprehensive Learning experience for Serious and Passionate traders/investors wanting to get the A-Z of what I call ‘Complete Market Analysis’ in one place in a rigorous three-month experience.

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Oliver James is a UK-based professional blogger, content writer, and content marketer who writes about travel and tourism, finance, real estate, and other topics on his blog. Passionate about writing, traveling, and getting the best deal on everything he buys, Oliver also writes for customers and helps them publicize their products, and services in the US and UK markets. He is a traveler who has visited over 35 countries and loves his job because it gives him the opportunity to find stories, experiences, and places which he can share with his readers. Oliver James is a professional blogger, content marketer, traveler, and electronics enthusiast. He started blogging in 2016 and has become a contributing writer for several blogs, including Android Authority and Elecpros. Oliver has also published his own informational books with Kindle Direct Publishing on subjects like Flappy Bird and Google Cardboard.