The truth behind investment failures: 70% of investors have fallen into these traps

Why Are Investment Losses So Common?

There’s a harsh statistic worth our vigilance: Over 70% of investors have experienced losses due to poor decisions. This is not an isolated case but a widespread phenomenon in the market.

You might have experienced this — eagerly buying at a certain point, only to find the market trend completely opposite to your expectations. Even more painfully, you may consider yourself knowledgeable about investment techniques and good at analyzing market data, yet still end up with a failure.

The issue isn’t that you’re not smart enough; it’s that investment losses are almost an inevitable part of every investor’s growth process. The real difference lies in whether someone learns from these experiences to become more resilient, or repeatedly falls into the same traps.

The Seven Real Causes of Investment Losses

Emotions Hijack Decision-Making

Fear and greed are the two most powerful forces in the investment world, and also the most destructive. When investors with weak risk tolerance are driven by speculative emotions to chase high-risk assets during market instability, they are highly prone to panic. The result is — chasing gains when prices rise, cutting losses when prices fall, and blind trading leading to losses.

The fundamental reason behind this is a lack of discipline. Risk control, patience, and self-discipline are three aspects no investor can bypass.

Incomplete Investment Knowledge System

Many people treat investing like opening a blind box — without clear investment goals or correct understanding of the investment direction, leading to blindly following trends.

Worse still, they tend to directly “copy” others’ trading strategies, hoping to profit by imitation. But each investor’s risk tolerance, capital size, and time horizon are different; methods that make money for others often turn into tools for losses in your hands.

Imbalanced Portfolio

This pitfall falls into two extremes:

Over-concentration: Putting most assets into high-risk investments, like putting all eggs in one basket, which can lead to total loss if the basket tips over.

Over-diversification: On the other hand, some investors spread their assets too thin, resulting in no scale effect. Even holding stocks of excellent companies, if the quantities are too small, it’s hard to generate significant returns.

Short-term Trading Is a Newbie’s Graveyard

Short-term trading requires rich practical experience and superb technical judgment, but most novice investors lack these. The typical outcome is buying at high prices and then cutting losses at lows due to emotional swings. In short-term markets, one mistake can wipe out multiple previous gains.

Lack of Asset Monitoring

Long-term investing doesn’t require daily market watching, but regularly paying attention to major policies, company changes, and relevant information is essential. Especially for fund investors, monitoring fund performance and fund manager movements periodically is necessary; otherwise, risks accumulate unnoticed.

Excessive Caution Is Equally Deadly

Interestingly, cautious investors can also fail. When markets fluctuate, they focus excessively on avoiding losses, missing the opportunity to make big money. For example, during volatile periods, they prefer to cut losses early and lock in gains, but this often results in losses instead.

Retail Investors’ “Position Fear”

This is the most common problem: as long as there’s money in the account, they always want to trade.

But in reality, the investors who truly make big money in the stock market emphasize light or no positions. The real earning opportunities are limited; wasting time, energy, and capital on mediocre opportunities might earn small profits when lucky, but most likely will wipe out gains.

The smart approach is to focus on high-probability, high-certainty opportunities. When there are no clear trading signals, it’s better to stay in cash and wait patiently for the right moment.

How to Self-Rescue After Investment Losses?

Learn from Experienced People

The quickest way to recover your mindset after failure is to communicate with seniors who have similar experiences. Their lessons learned can empower you, and rational advice from family and friends can provide emotional support.

Temporarily Steer Clear of Financial Information Overload

After experiencing failure, don’t immerse yourself in大量 financial information, as this will only increase mental fatigue and possibly lead to further failures. Shift your focus to other hobbies; this is a wiser choice.

And remember: Media reports only reflect temporary facts; markets are constantly changing, and data can never fully predict the future. Don’t overly rely on media for investment decisions.

Shift to Long-term Investment Mindset

Short-term trading is far more difficult than it seems. There’s no need to demand perfect execution in the short term. Focus on substantial long-term investments, which will help you avoid excessive frustration from short-term setbacks.

Investment is fundamentally a forward-looking activity; short-term volatility should not be a psychological burden.

Control Impulses for Short-term Trading

A typical case worth pondering: a certain fund grew rapidly after the financial crisis, increasing from $18.7 billion in 2008 to $87.1 billion in April 2013, but then plummeted sharply.

This fund’s strategy was to frequently adjust stock, bond, and cash allocations, trying to actively balance. But in reality, this frequent adjustment pattern cannot sustain continuous growth or guarantee long-term profits.

Focus on Controllable Factors

For ordinary investors, instead of obsessing over market trends and interest rate changes, focus on factors you can control: optimize portfolio management, adjust asset allocation, maximize income, and minimize costs.

If possible, switch active funds to safer options to further reduce risk.

Diversify Your Investment Portfolio

Over-concentration or over-diversification can both disrupt portfolio balance. A reasonable diversification strategy can maximize returns — for example, holding large-, mid-, and small-cap stocks simultaneously, or investing in multiple sectors with strong performance, increasing chances of substantial profits.

Prioritize Risk Management

Before investing, consider your age, financial situation, and risk tolerance thoroughly. Consult a professional financial planner if needed.

For example, investors nearing retirement should avoid over-allocating to equities and instead shift toward lower-risk assets.

Finding Certainty in Uncertainty

In recent years, financial markets have been turbulent, with unprecedented uncertainty. How can investors overcome cognitive biases and find certainty amid chaos?

Key Point 1: Corporate Profit Potential

The essence of investing is betting on a company’s profit growth. So, focus on a company’s profitability and sustained core competitiveness.

If a company has strong, continuous profitability, the market has no reason to abandon it. Conversely, companies that are just riding the wave will be discarded once the wind shifts — because they lack sustainable core competitiveness.

Key Point 2: Multi-Asset Allocation Strategy

In chaotic environments, rationally allocating different types of assets can provide higher investment certainty.

Ordinary investors often get lost in complex information, leading to extremes: either pouring most funds into high-risk assets and taking on excessive risk, or only investing in low-risk assets and failing to meet return goals.

A multi-asset portfolio with dynamic management can help you seize opportunities and effectively reduce risks in turbulent markets.

Key Point 3: Rational View of Risk and Return

Risk is unavoidable; what investors can do is keep risks within their acceptable range. This involves two steps:

First, fully understand your risk tolerance and strictly control your positions. Second, only invest in companies you deeply understand — their business models, industry competition, strengths and weaknesses, upstream and downstream supply chains, etc. Avoid earning beyond your capacity.

Key Point 4: Trust in Common Sense

Ordinary investors cannot accurately predict short-term market rises and falls, but over the long term, it becomes clear: undervalued quality companies will eventually return to their intrinsic value.

Emerging industries like technological innovation and sustainable energy are likely to be the future directions of economic restructuring.

Final Words

Ancient wisdom says, “Knowing but not investing leads to ignorance; investing without knowledge leads to negligence.” Investment losses are not scary; what’s frightening is our failure to learn from them.

True investment success requires self-awareness across multiple dimensions: knowledge reserves, capital scale, psychological resilience. Continually learn financial and investment knowledge, understand market trends and movements, analyze the big picture carefully. Set clear investment goals, develop precise strategies, and strictly control costs and risks.

Investment losses are just part of the process, not the end. The key lies in how you respond.