Introduction

During the bull market, investors get stamped upon with a lot of tips from everyone around them. It is difficult to identify which sector is about to break out or which stock will break down. 

Retail investors tend to lose more money in markets like the Indian stock market. Which majorly depends on the foreign inflows and outflows because the retail participation is still less as compared to the other countries. 

We will ponder upon some of the reasons for retail investors to not make money. Before that, let us understand how a retail investor can enter the financial market segment. 

Beginners need to make sure that they open a Demat account along with a trading account before entering the Indian stock market.

Demat Account Meaning

In a bank account, investors keep their excess cash, in Demat account investors store their financial securities. Just like banks make sure of the safety of investors’ money, the broker has to take care of the security of financial instruments. 

Trading Account Meaning 

Trading account works differently than a Demat account. A Demat account is used to store and transfer financial instruments whereas the trading account is used to buy and sell those financial instruments. The trading account is linked to exchanges which helps in showcasing real-time price fluctuations. 

Now that the meaning of Demat and trading account is clear. The reasons why it is not easy for a retail investor to make money are; 

• Lack Of Research 

Usually, retail investors do not research the company and its business. Retail investors do not spend time doing the fundamental analysis of the tip that they get. Checking a company’s financial health is very important if you are investing in it for the long term. If there are any red flags, analysis and research will highlight them and save your hard-earned money. 

• Investing Against Institutional Investors 

The majority of retail investors do not spend enough time thinking about the wave that institutional investors bring. Retail investors depend more on opinion rather than data. Therefore, the best alternative is to look at the traded quantity of the stock. If the volumes are exponentially high that means institutional interest is gauging and you can look for a trade in the same direction as theirs. 

• Focuses On Opinions 

One thing retail investors should understand is that nobody can predict the market. The financial market follows the basic concept of demand and supply. If the demand is high the price of the asset will rise and if not the price will decline. Thus, it is not that simple to predict the market. The majority of retail investors listen to other “market gurus” and invest. They do not look at the data that backs the movement for any price. 

What Retail Investors Should Do? 

First and foremost, retail investors should respect take profit and stop-loss levels. These are the two most important levels and these levels should be respected by every trader. If you hit your stop loss then get out of the position, that will eventually help you in saving your capital. 

Secondly, retail investors should always rely on data. Data speaks more than any other thing in the financial market. Lastly, retail investors can learn the basics of technical analysis to check the right time to enter the stock market. 

Conclusion

Beginners should open their share trading account with a full-service broker. Full-service brokers provide industry and stock-specific research reports to their clients.