If we are prepared to persevere with passion and dedication, we can turn things our way even if the odds are stacked against us. There are many, who overcome severe reverses to triumph in the end. But to strike rich through stock investments, one needs more than a fair share of luck despite the much touted analytical tools. Even great investor gurus bite the dust once too often! There are too many variables at play including the human factor!
Of course, one can avoid most pitfalls by understanding the methodology of the masters of investing; but, how many have the discipline & patience to monitor, wait for the time to invest and cash out? The man in the street will not have much clout to hold-out when confronted with a crunch situation and mostly that happens in dire times when the economy is in limbo, with the stock markets also in the pits! Many are led the garden path by the successes of few, but the failures of many are hardly trumpeted!
Real returns on investments depend a lot on luck. Even the best of companies in the most promising sectors can suddenly turn turtle due to mismanagement that comes out of the blue, leaving hardly time for most to exit in time. Despite the best efforts, some get information much before others, who are left in the lurch. So retail investors are caught napping, or rather, get played out repeatedly.
Even the best of companies are held together by few key executives. If there is an exodus of such talent, the fortune of the company will take a dive. Some companies based in China, listed their shares outside their borders; no doubt, they were hailed as sure winners, dealing in hot products for their rising middle class. But soon, the great expectations came crashing down, when the promoters pledged their shares as collateral to raise personal loans and the lender sold them later to recover the loans; others became aware of this issue only when the share prices plunged after the shares were sold at a heavy discount!
Technology plays a big part. A new upstart can turn the tables on others in no time. Especially electronics companies are vulnerable and the famous dotcom bust is hard to forget! Warren Buffet refused to invest in companies where the business plans did not make sense, but he too had his share of losses, after testing the waters reluctantly! Though brick & mortar companies came back into fashion, a fool and his money are soon parted always.
Though we have analysts with the latest tools, the human factor plays a crucial part. While some are out to exploit the gullible with outrageous ideas, with sure fire success stories, some promoters get disillusioned when things start to fall apart; they lack the persistence and start to drift. There is no refined tool to prejudge these character traits!
Mutual Funds and Unit trusts have front end charges which eat away the returns and have to be paid even if the funds lose money, as they are fixed in nature. The moment one invests, the charge applies to reduce the capital. Most also do not out-perform the markets, so the returns become a mirage mostly; good times are loudly advertised but bad times met with deafening silence!
A safe way to invest in stocks will be in blue chips, especially in well established banks with good history. The governments take care of them anyway, as the big ones are just too big to fail! One needs real patience and staying power, which are not usually associated with the man in the street! Even blue chips face survival issues like BP, which incurred heavy losses running into billions after the Gulf of Mexico oil spill. In a way, stock investment is like a lottery and needs the luck factor to get rich. The man in the street does not have the time, the staying power, or the clout to come out a winner. A sure way is still to invest in own efforts to make our lives a success, than depend on the whims & fancies of others, who are increasingly led by greed. It may look like a cynical view, but too many are burnt in stock markets repeatedly.