If you are a new investor to the stock
market, there is a good chance you have lost money already. Even
those who have been in it for a while and have been studying it
closely are likely to lose money. I am not an expert on stocks in
fact, I would still consider myself to be pretty new and
inexperienced with the stock market, but I have studied it over the
past year and nothing is really convincing me that it is not a scam.
There is a ton of information to learn about stocks
with all the different statistics and numbers, all the trends,
charts, and recommendations. Even when you do your research and try
to pick the best stocks, there is no guarantee that it is going to
work out in your favor.
One common piece of advice is to buy
low and sell high, and I think this is good advice but it is hard to
follow because it goes against your natural instinct. For example if
you see a stock that has been going down you would not want to invest
in it because it looks like it will lose money. Same goes for when a
stock is doing really well, it makes you think you should invest in
it because it is going up.
Sometimes this works out but often it
does not. That stock that was doing amazing and was at an all time
high when you bought it is now tapering off and starting to go down.
Those stocks that looked terrible before are now starting to go up.
It's like you can't win.
In my experience it seems like the
market is always against you. As soon as you buy a stock, it goes
down. As soon as you sell a stock it goes up. I know it is hard to
time the market and nearly impossible to buy at the low and sell at
the high but it just seems like whatever you do ends up being the
wrong decision.
I'm sure there are individuals who do
know how to make the market work in their favor, for example
professionals who trade stocks for a living or those who have been
studying the market closely for many years. These people have the
advantage and know how to play it so they make money. But for the
average person who is not an insider, they are more likely to get
taken advantage of and lose money.
One thing that should be very simple
and straight forward but is not is what makes the price of a stock go
up and down? People will say things like supply and demand, company
earnings, and daily news will affect the price. But there really is
no clear explanation. You just have to look at your screen and accept
whatever number is shows you.
You would think that a stock's
performance should be based on how well a company is doing. For
example if they are earning a lot of money each year, the stock
should go up, but this is not the case. A company can be making
billions of dollars a year and their stock price does not change,
while another company can be losing tons of money every year and
their stock price can be going through the roof.
It seems stock price is more based upon
what people think about a company or stock. I would explain it in
this analogy:
A stock is like a membership to a
company. If there is a company you like, you can buy a membership to
be part of their club. If you really like it, you can buy several
memberships to that club. There are only a limited amount of
memberships available for each club.
If the club is popular and more people
want to get in, the price of the membership goes up. If no one is
interested in the club and the current members want to get rid of
their membership, the price of the membership goes down. Again, I'm
not an expert but if this analogy is correct, the stock market is
more just a popularity contest among companies where individuals try
to join the popular companies before everyone else.
Can you make money in the stock market?
Of course. If you get lucky by not only buying but also selling a
stock at the right time, you can make money. The problem is it is
always a gamble and no one knows the future so there is just as much
chance that you can end up losing money.
This is why I consider it a scam
because it is basically just gambling and unless you are an insider
with decades of experience, there is a good chance you are going to
end up losing money in the stock market. Feel free to comment below
on your thoughts about the stock market.
