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How to Never Lose Money in the Stock Market Again

An "investor" for five years. Making money in the stock market & trying to help others make money.

Why Do You Lose Money in the Stock Market?

There is a straightforward way to put this:

  • You are not patient
  • You do not invest forever
  • You are not optimistic
  • You do not trust yourself

The stock market is there to serve you (if you let it). Let me explain how!

When you buy a stock, you buy it after due diligence. You do your research & buy the stock. You do not give away your money & purchase something you know nothing about.

Now comes the question of timing. If you were so confident about buying that particular stock, why do you want to sell it when you see a small profit? Or, why do you want to exit your position as soon as you see your stock fall?

The market is nothing but a money-making machine for investors. It would help if you bought today, tomorrow & every other time you can afford to buy at a price-drop.

When you sell your stocks for a small profit, you leave out all the gains in the future. When you sell your stocks at a loss, you do not give them the chance to recover.

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Things To Understand

I have been investing for the past five years. Be mindful that I used the word "investing" & not "trading." When you invest, you artificially "lock in" your money for an extended period. You do not sell your stocks whether the prices go up or down. In fact, you buy more at price drops & increase the number of shares in your portfolio.

What you are doing here is building a portfolio. When you give yourself time & look into the future, you will see that holding onto the stock was the best decision you ever made.

Introduction

This article will not explain any Wall Street jargon such as P/E Ratio, P/BV, Debt-Equity Ratio, Operating Profit Margin. I am writing this for those who want to touch the topic on a more fundamental level.

Whether you are a beginner or somebody who already does some buying & selling, I will tell you some things that you can follow & watch that money come pouring in.

how-to-never-lose-money-in-the-stock-market-again

What Most People Do That Makes Them Lose Money (Scenario 1)

Let's go back to the year 2000 (to keep it accessible) & take the example of a good stock (Apple):

Apple closed around $1 on 1 Feb 2000. You buy 1000 shares and start to build your portfolio. As the days & months pass by, you see that there is little to no movement. Naturally, you get agitated & frustrated & you decide to sell.

how-to-never-lose-money-in-the-stock-market-again

In about ten months, the stock fell to $0.27 & was looking beat up. In a few months again, the stock returned to $1 & you saw an opening and thought to yourself that this would be the perfect time to exit.

how-to-never-lose-money-in-the-stock-market-again

You make your move. You sell your 1000 shares at no profit - no loss.

When you sell, you see that the price is still stable around the $1 mark. A few years pass by & to feed your curiosity, when you check the share in passing, you are happy that you sold it because you wouldn't have made any money on it.

Now comes 2005 & this is when the stock starts to explode. It trades at around $1-$1.5 and begins to see a gradual increase. Gradually, as time passes, this stock keeps increasing in value & grows to $7.31 by 1 Feb 2010.

how-to-never-lose-money-in-the-stock-market-again

Now you think to yourself that instead of selling, you should have held your position & "locked-in" the money for the long term.

Now, you can either buy at $7.31 a share or wait for the stock to fall. By 1 Feb 2012, the share rises to $19.37 & now the shares you brought for $1000 would cost you $19,370.

how-to-never-lose-money-in-the-stock-market-again

What made you lose "your" money here? These things:

  • No patience
  • Not buying at drops/no constant buying
  • No long Horizon
  • Not trusting your judgment

The share price kept increasing, but I will stop here & you can read ahead to understand the point I'm trying to explain.

What would I do/How Not To Lose money (Scenario 2)

Let's start from the point in 2000 where you are agitated & frustrated & want to sell.

As I mentioned, ten months after 1 Feb 2000, the stock came down to $0.27. Now instead of feeling like a bum & selling, what do you do? You take the winning/money-making approach - You buy more.

Why do you buy more? You do this because you purchased Apple after your research in the first place & the other factors I mentioned.

Now you buy 1000 more shares at $0.27.

So now this is your total Apple shares portfolio:

  1. One thousand shares brought at $1 => $1000 & 1000 shares
  2. One thousand shares brought at $0.27 => $270 & 1000 shares

Total Cost (Investment) = $1000 + $270 = $1270

Total Apple Shares = 1000 + 1000 = 2000 shares

Now, we fast forward to 2005, when the share still trades at $1-$1.5. What do you do? You keep buying, so you buy 1000 shares at $1.5, taking your total shares to 3000.

You buy 1000 shares at $1.5, taking your total buying cost (or investment) to $1270 + $1500 = $2770

Now you see the price increasing, and by the year 2010, on 1 Feb, the share trades at $7.31.

Now you can either buy more at this price or decide to sell. You can also stay put and choose to hold your position & trust your judgment.

You wait for the results & the money to pour in. Fast forward to 1 Feb 2012; the Apple share now trades at $19.37.

how-to-never-lose-money-in-the-stock-market-again

Let's do the math now:

Number of shares in your portfolio: 3000

Your investment cost: $2270

Current price: $19.37

Current profit: 3000 x 19.37 = $58,110

You invested $2270, and you have a whopping return of $58,110. Why do you think that is? These are the following reasons:

  • Patience
  • Buying at drops/Constant buying
  • Long Horizon
  • Trusting your judgment

How To Go Forward? (Before Reading, Try To Guess)

You have a handsome profit of approximately $58k & now you have three choices in front of you:

  1. Buy
  2. Sell
  3. Hold

The best way to go forward is always to buy more & keep buying. The examples I shared with you are up to the year 2012 & we are in 2021 right now.

I do not want to make it too confusing for brevity by bombarding my readers with too many numbers.

The Apple share currently trades at $146.39. This is the last traded price on 16 Jul 2021. You can imagine what kind of profit you can make if you decide to go with either three options (Buy, Hold or Sell.)

- However, selling should never be an option.

- Hold when you have to because of lack of funds to buy more

- Buy when you can, always.

how-to-never-lose-money-in-the-stock-market-again

Conclusion

I want to conclude by giving a few golden rules that I follow & I would love nothing more if you followed them too:

  1. Always buy to hold
  2. Keep buying whether at drops or those stable (frustrating junctures)
  3. Forget about selling
  4. The time horizon to hold should be infinite (forever)
  5. Trust your research, judgment & instincts
  6. The stock market is there for you (if you let it)
  7. Always be optimistic

Would you please write down in the comments what you think about this way of making money in the stock market?

I would also love to know what your opinions about this article are? Do you agree or not? What are your views?

Let's have a discussion & try to help others make money!

My Experience

I have never lost money in the stock market & I am confident that I never will. I have been investing for five years & I have just started. For me, investing will end when I die.

I will keep following what I am trying to explain here & if you made it till here, you could contact me & we can have a discussion. If you want any more such articles then you can send me an email or comment below.

I do not offer any paid services for stock market investing. I am sharing what I have learned & hoping to help others in the process. Writing, teaching & communication are a few of my passions. I am a freelance content writer, entrepreneur & lawyer.

My Recommendation

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2021 Kunal Gupta

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