The main dream of most inexperienced investors and traders entering the stock market is the unquenchable hope of sudden enrichment. Therefore, many of them use the term “win on the stock market”, identifying it with a casino. The harsh reality quickly breaks their dreams, takes away capital and makes you start with the main thing – to accept reality and figure out where the earnings from the stock market actually come from.
The amount by which capitalization of capitalization of all companies increased/decreased during the reporting period is the earnings of all participants. Bonus paid dividends. Thus, over the average term of investment, earnings on the stock exchange becomes very close to the market results of the index. Moreover, when calculating the index money is not taken, it means that we assume that investors are investing all the capital. Mathematically, the axiom paradoxical for an inexperienced trader is obtained: ALL market participants will NEVER be able to beat the stock index.
That is, statistically, a player can count on the result, which shows a wide index. However, for most inexperienced players, this is not only not interesting, but is also perceived as a very bad alignment. Where does this massive arrogance come from, that it is you who beat all the others? However, it is self-reliance that leads further …
The stock market has at least a positive average yield (index increase). Still, stocks have a tendency to increase their value, and enterprises earn profits as the economy grows. However, it is inexperienced players who are often fascinated by the words futures, options and forex. They do not understand the essence of the fact that the amount of money won by someone on these instruments is equal to the amount lost by someone, minus the commission of the organizers. It’s simple – the money won is taken from the pockets of the losers. Open the definition of “tote” and find out with surprise that this is it. And an inexperienced player relies on the likelihood of the origin of certain events indirectly related to the world of the stock market. And of course, in most cases, it turns out in the company of other losers.
However, from all sides they hear how thousands of percent earn around on incredible strategies, trading robots and super ideas. And an inexperienced trader, trying all this cuisine, gradually becomes experienced, but without capital …
The actual statistics is very simple. According to the results of investors in the stock market for several years of continuous activity, everything works exactly according to the Pareto rule: 80% of traders lose the index, and the amount of their loss is taken by the remaining 20%. Moreover, of these 20%, only 7% gain from the index, and 13% get the same result.
Everyone heard about Pareto’s rule, but in the head of the players everything is exactly the opposite – most consider themselves to be outstanding, and their colleagues – losers. The illusion that the financial market can be fabulously enriched, strongly supported and cultivated. In fact, not everything is so sad.
Just defeat your arrogance and give up the illusion of sudden enrichment. This is 80% of the case. And then everything is simple and quite boring: invest in stocks! It is the business that underlies the stock that works in the real world and creates the very added value that you can count on.