We all want to succeed in everything that we do, including investing in the stock market. Though I have no analytical data to back it up, I am convinced that most people will lose money in the stock market over their lifetime. So why do so few people
succeed at investing? Could it be that an individual's desire to succeed be a significant reason for their failure.
When discussing investing with various people I come in contact with, the conversation always follows a similar track. Usually, one of these:
- The person will mention a few stocks they did well with, then upon probing will admit overall they were down and they are looking for a new strategy to follow.
- The person will make a broad statement like ‘I've pulled everything out of the market it is just too risky.' When pressed they admit to losing money not only this time but at other times when they abruptly exited the market.
- The person will concede that after significant losses they turned their money over to a professional.
Obviously, there are some success stories, and some of them are even believable. Due to the 2008 market downturn, most people are now comfortable admitting losses because they know they are not alone. When you are losing 10% a year while the market is going up 20% a year, its harder to fess-up since you feel you are the only one losing money.
Why do so few people succeed at investing?
All the pieces to answer this question were presented above. People want to succeed, but don't know how. So they try to follow someone (or something) that appears to be succeeding. A friend at work, or a talking head on a business show mentions a stock or strategy that is out performing the market, and the investor jumps on board. Unfortunately, he or she is late to the party and the run-up either stalls or reverses. Fearful of a greater loss the investor sells out and moves to the next hot stock or strategy. Eventually, they permanently exit the market or turn their money over to a professional that may, or may not, improve on their performance.
A Winning Investment Strategy
People do make money in the market, but it is not by following the talking heads or a tip from a friend. Long-term success in the market is based on a sound fundamental investing strategy that the investor is so confident in, that he or she will follow it in both bull and bear markets. For me, this is a value-based dividend growth strategy. My goal is to generate a higher dividend income than the previous month through the purchase of select dividend growth stocks. Here are some of the things I look for in an investment:
I.
