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Psychology of a Stock Market Loser

Here’s part of a conversation I had last weekend with a friend who wanted me to help him out with his loss-making stocks. Let’s call him Rohan.

Me: Why are you so depressed?

Rohan: I hate my stocks.

Me: Oh, another member of the pretty big ‘I hate my stocks’ club?

Rohan: I’m sick of looking at my stocks. And given that the markets are falling, I haven’t looked at my portfolio for days!

Me: What stocks do you own at the moment?

Rohan: Don’t want to show.

Me: C’mon, let’s see what you own and where you stand as of now.

Rohan: Can’t we do something else?

Me: Like what?

Rohan: Like, not see my portfolio? As I said, I have not seen it myself for the past many days. It makes me sick!

Me: We could, but seeing that you want to get rid of your losers, it’s a good idea to look at those losers, know where you’re at before we start any kind of discussion on how to make things better.

Rohan: Okay, have a look at my stocks, but don’t tell me.

Me: Tell you what?

Rohan: How much losses I’m sitting at as of now.

Me: But your loss is your loss. Not knowing won’t turn them to profits!

Rohan: I don’t want to know. It will depress me.

Me: Or maybe it will help you step into reality?

Rohan: I’d really rather not.

Me: I know but let’s do it anyway.

Rohan: I’ll cry.

Me: Really?

Rohan: Yes!

Rohan was totally serious.

Over the years, I have been privy to some very weird thinking, habits and behaviour around losing stocks and people who hold such stocks in their portfolios.

I’ve seen people who would check the stock prices up to fifty times a day expecting them to rise the ‘next’ time. Literally!

People who would buy and sell the same stocks repeatedly hoping to see a higher price next time around.

People who would average bad stocks to ‘reduce’ their losses.

In crashing markets, I’ve seen people who would only look at websites that showed them stock quotes that were delayed by 15 minutes, because ‘live’ quotes would’ve gotten even lower. (Yes, that’s ridiculous yet true!)

People who would practice superstition (like seeing their portfolios only after 12 PM) wishing that this would work and their falling stocks would rise!

People who would remove (and intentionally) those stocks from their portfolio trackers that were incurring them the biggest losses.

People who would get angry with me when I asked them to sell their bad stocks at deep losses.

People who wanted solutions from me but would not let me see their portfolios.

By the way, Rohan still doesn’t know how much losses he’s incurring on his stocks. Yet he’s waiting for me to help him as his last night call suggested.

Oh God! Why do we make simple things complex?

I don’t have the answer. Can you help?

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About the Author

Vishal Khandelwal is the founder of Safal Niveshak. He works with small investors to help them become smart and independent in their stock market investing decisions. He is a SEBI registered Research Analyst. Connect with Vishal on Twitter.

Comments

  1. Amit Trivedi says:

    This is known as Ostrich Syndrome. Very well articulated. Keep up the good work.

  2. Venkateshwaran says:

    Those invested in stock should remember that if they are invested Long they need not worry. There is nothing like a SIP in the present times, just imagine how much more gain in the long run. To much buying and selling will only make your Broker Rich, Sorry, Sir I am only repeating what you say.

  3. RichFellow says:

    A person with average IQ and average common sense would never ever buy bad stocks.
    To sell losers is not the solution to keep ur portfolio healthy(u may just get notional satisfaction by not seeing any red in portfolio).
    Look at how so called blue chips are falling like nine pins.
    One thing is clear, when market cracks Elephants, Horses and Donkeys all falls and when market rises Elephants, Horses and Donkeys all rises.
    To be a winner u have to be ONE lucky Warren Buffet out 700 billion people in world or ONE lucky RJ out of 1.5 billion Indians.
    Disclosure: The above comment reflects my mood after seeing mood of my porfolio…LOL

  4. Mansoor says:

    All the things that a Stock Market Loser does mentioned above is true, the reason behind is lack of knowledge. People do not know or don’t want to know what is stock, how does stock market work, how to pick the right stock, when to buy/sell and most importantly what to buy/sell. If the finance/personal finance basics like compounding, debt, stocks, bonds, spending etc are included in higher secondary as a subject, young Indians will come money smart right out of school. There needs to be mass awareness and it needs to be pushed down people’s throat. If there are options, people never learn. I bet there may be so many people who read blogs for the sake of reading and don’t make any changes in their lives, I hope Rohan takes charge.
    If he is your close buddy, I would suggest you kick his ass and get him on track. I could do that with few selective friends. Others will run away if I even talk about it 🙂

    • Indeed, you made a very valid point about teaching the basics in high school, though the basics also need to cover ‘how to mind behaviour’…for that lack of EQ is what causes such funny behaviour in stock markets.

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