Just about everyone knows the grisly statistics about options trading: 90% of all naked option players (no, that doesn't mean they trade in the buff, only that they buy uncovered puts or calls) end up losing money. But hardly anyone knows the equally grisly statistics about equity trading: 80% of all stock investors end up losing money. But how can that be, you ask? Over time, the stock market is a sure thing, a guaranteed way to make money. It's so easy. All you have to do is buy good stocks and hold them. Everybody says this, pundits, brokers, financial advisors, the media, the historical record itself. No one who simply bought and held the Dow Jones Industrial Average or the S&P 500 has ever lost money over a 20-year time span. Right? Yes, right. Now go find me someone who bought and held for 20-years. You should be able to find a few, about 20% to be precise. The other 80% lose money.
How does this happen? A couple of ways. Primarily, it happens because no matter how resolute people think they are about buying and holding, they usually fall into the same old emotional pattern of buying high and selling low. Investors are human beings. Human beings naturally want to be in the winning camp, and human beings naturally seek to avoid pain. When things are most euphoric in the investment world, at the top of a long bull market, these human beings are in there buying. And when things are most painful, at the end of bear market, these human beings are in there selling. In fact, it's usually the final capitulation of the last remaining
DOW Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
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