Despite some intensive searching online, I have been unable to locate a fact that I remember reading some months ago.
The fact was this: 80 percent of private investors lose money in their direct investments.
This is the secret that Wall Street does not want you to know. I guess it could be worse. I remember reading some years ago that 97 percent of all gamblers in the UK lose over time.
There are several reasons for why the majority of investors lose money. The main one is almost certainly due to knowledge. Whilst it is not my intention to suggest that insider knowledge is used, it is hard to imagine that some unscrupulous traders are not involved.
What is more important is that many or most private investors simply do not conduct enough research into the firms in which they plan to invest. Company accounts are not looked at or only briefly. Competitors are not assessed thoroughly.
The stock exchange is a very competitive place to make money. All those red braces wearing investment banker types take the game very seriously and so should we private investors if we plan to win.
In fact, the stock exchange is so competitive that at times even some of these investment banks fail to make a profit, despite all the advantages they hold over the rest of us.
Therefore, we private investors need to work very hard to compete. It is possible. The markets are so large that many private investors can earn a comfortable living online.
It is also vital to be disciplined and to follow investments and companies of interest very closely. If you need to sell out at a moments notice, the discipline to do so is required immediately. Failure can cost you your profits and potentially your initial investment as well.
As prices change, so must your goals. Using a stop loss or some variant can help your selling strategy, but when it is time to sell, you must.
Before you start on your own private stock exchange odyssey, you need to invest time and effort to learn the basic (and some more advanced) skills. These will help you for years to come. You then need to commit to continual improvement in your knowledge and skills. This is what will keep you up with 'the game'.
You may also find that you need some form of computer monitoring software. Many of the services allow real time price data. This will help you to accuately track your performance over time and alert you to any important news about your companies. For medium to large investors, such software is worth its weight in gold.
As time passes, you will need to understand the basics of asset allocation. This will help to prevent you from having all of your net worth tied up in company stocks and thus will help to provide more stability to your personal finances. As your net worth grows, it becomes ever more important to be diversified so that your future is tied less and less to the results of the stock exchange.
In conclusion, the stock exchange is a place where fortunes can be made and lost, but only the hard working are likely to prosper. Good luck.
Stuart Langridge is an experienced investor and investment adviser. To read more of his down-to-earth investment advice, click here: http://www.StockExchangeSecrets.com