I found that many people misunderstood risks or underestimated their tolerance for risks. Hence, I always want to share the ultimate reason why people lose money in the financial markets. It can be stocks, properties or any asset class. The reason is the same – they buy high and sell low.
Buy high and sell low
While we all know that to make money is to buy low and sell high, most investors do the opposite without realising. For example, very few people were interested in the property market in 2004 or 2005. As prices went up in 2007 and even more so in 2012, investors started to pour their savings into properties. Is this buying low and selling high? To them, this is entirely rational as they share their reasons for buying a property now (although research have shown that we decide first and reason later):
- Property prices go …