The stock market is a place where anyone can invest and potentially earn high returns. However, not everyone who invests in the stock market makes money. In fact, according to some estimates, only 10% of investors consistently make profits, while the rest 90% either break even or lose money. What makes the difference between the successful 10% and the struggling 90%? What do they do differently, and what qualities and routines do they follow?
One of the main factors that separates the winners from the losers in the stock market is their mindset. The successful investors have a long-term perspective, a disciplined approach, and a rational attitude. They do not let their emotions, such as fear, greed, or overconfidence, influence their decisions. They also do not chase the latest trends, fads, or tips, but rather focus on the fundamentals and the value of the companies they invest in.
For example, a successful investor would not panic and sell their stocks when the market crashes, but rather see it as an opportunity to buy more quality stocks at a lower price. They would also not buy a stock just because it is hyped up by the media or their friends, but rather do their own research and analysis to determine its true worth.
Another factor that distinguishes the profitable investors from the unprofitable ones is their strategy. The successful investors have a clear and well-defined plan for entering and exiting the market, and they stick to it. They also have a profit-taking strategy, which means they know when to sell their stocks and lock in their gains. They do not hold on to their stocks for too long, hoping for more profits, or sell them too soon, leaving money on the table. They also have a risk management strategy, which means they know how much to invest in each trade, and how much to risk. They do not put all their eggs in one basket, or risk more than they can afford to lose.
For example, a successful investor would have a target price for each stock they buy, and sell it when it reaches that price, regardless of how the market is doing. They would also diversify their portfolio across different sectors, industries, and asset classes, to reduce their exposure to any single risk factor. They would also use stop-loss orders, which are automatic orders to sell a stock when it falls below a certain price, to limit their losses in case of a sudden market downturn.
A third factor that differentiates the money-making investors from the money-losing ones is their habits. The successful investors have a regular and consistent routine that helps them stay on top of the market and their portfolio. They do not trade impulsively or randomly, but rather follow a schedule and a process. They also keep learning and improving their skills and knowledge. They do not rely on luck or intuition, but rather on research and analysis. They also keep track of their performance and review their results. They do not ignore their mistakes or failures, but rather learn from them and correct them.
For example, a successful investor would set aside a specific time each day or week to monitor the market and their portfolio, and make any necessary adjustments. They would also read books, articles, reports, and newsletters to keep up with the latest news and trends in the market and the economy. They would also use tools and software to analyze the data and charts of the stocks they are interested in, and look for patterns and signals that indicate the best time to buy or sell. They would also keep a journal or a spreadsheet of their trades, and evaluate their performance periodically, to identify their strengths and weaknesses, and learn from their successes and failures.
In conclusion, the stock market is not a place where anyone can make money easily. It requires a lot of hard work, discipline, and patience. Only those who have the right mindset, strategy, and habits can consistently make profits and beat the market. The rest 90% of investors who do not follow these principles are likely to struggle and lose money in the long run. Therefore, if you want to be among the successful 10%, you need to adopt the qualities and routines that they follow, and avoid the pitfalls that they avoid.