There is a dark humor joke that says:
“Retail investors are the only group of market players who perform consistently. How so? Because they consistently lose money!”
If you belong to this group of retail investors, you probably aren’t laughing, at least not to the bank.
Most retail investors lose money in the markets when investing on their own. So why do they consistently make investment losses?
According to financial academics there are 2 primary reasons.
- The average retail investor is often misled by a set of investment misconceptions.
- The average retail investor (and also investment professionals) often lose money because they make decisions based on emotion and irrational human behavior.
Nowadays there are many sources of information online. Some of these are outdated or unreliable, and may lead to misconceptions which can wreak havoc on your investment portfolio.
Majority of retail investors in Singapore (as well as other countries) are prone to such fallacies because of their lack of consistent and disciplined approach to the market.
Armed with limited investment knowledge and blind optimism, they are prone to making amateur investment mistakes like:
- Buying too high and selling too low
- Following hot tips and rumors blindly without doing any market research
- Listening to self-proclaimed gurus with no credible investment track records
- Basing their buy/sell decisions on gut feeling and emotions
So what are some of the most common investment misbeliefs, myths, and misconceptions that costing local retail investors their fortune? We shall cover those in next week’s article.
