Why Most People Loss Money in the Stock Market

April 8, 2011

A lot of people are afraid to invest in the stock market because they have heard tons of horror stories about people losing their savings and retirement money in the stock market. TRUE!

So what's the real score? How many people actually earn money in the stock market? How many poor people lose money in stocks? Well, to answer that, let me tell you about the Pareto Principle or the 80-20 Rule first.

The Pareto Principle states that 80% of what we do account to 20% of our results and inversely, 20% of what we do accounts to 80% of our results. This principle can be amazingly be applied in every area of our lives, the only difference is that the number can become very lopsided such as 90-10 or even 95-5. Some examples of the effect of Pareto Principle are as follows:
  1. 20% of your customers give you 80% of your sales volume.
  2. 20% of the people you know give you 80% of you headaches or happiness.
  3. 80% of your products are giving you 20% of your sale
Now, how will this relate to putting money in the stock market? This could mean that 20% of the people in the stock market earn 80% of the entire money available in the stocks, which means that 80% of the people actually lose money in the stock market. Now, to test this principle, we need straight facts, right?

So, what is the losing statistics in putting oney in the stock market today? The answer... 80-85%. Wow, that was pretty accurate, isn't it? And this, my friends, is the reason why people are still afraid of putting money in the stock market.

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