Why Do People Lose Money on Stocks?

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It’s no secret, investing in the stock market can be very lucrative if done right. The problem is there are so many people out there that do it wrong. Why? Because a lot of idiots oversimplify the process. Hate to break it to you, but no, you can’t just put money in and magically get millions out. It’s all about strategy. Making the right investments takes effort and research, but you also have to get the timing right, or you just may miss your mark.

While there are a ton of reasons that people end up losing money in the stock market, there are a few mistakes that will hit you the hardest: Poor Timing, Lack of Patience and Underestimation. These common mistakes have cost people millions, especially the inexperienced fools that believe that anyone can convert $100 into a million overnight.

Poor Timing

Ultimately, the basis of the stock market game is timing. If you can’t get this right, you will fail. You have to be able to “read the room.” If you happen to catch a good stock at a low price, the first thing you need to ask yourself is why is this stock currently so low? There are a few reasons that stock prices can be low. Maybe it’s a new company that can end up being a rising star. Or maybe the stock is in the midst of a downward spiral. This is where the research comes in. Is this company something that will be of importance in the future, or has it’s time come and go? And possibly even more important than the time that you buy in is the time at which you sell. You don’t want to sell too fast or you just may miss out on a sudden turn around, but you also can’t wait too long to sell or else the stocks may plummet. And in some cases, your stock may be holding steady or making small increases, but they may take so long that you would do better to take the loss and make the money back faster with other investments of the remaining money. Regardless, you have to think quickly, yet be wise and make the decision that is in your best logical interest versus getting caught up in how you feel about things.

Lack of Patience

Sadly, there are so many idiots out there looking to make a quick buck that they don’t have the patience to make real millions in the stock market. They buy a stock today and are ready to sell tomorrow because they didn’t see an increase. Fear and greed are the primary psychological motivators behind many transactions on the stock market. So, it’s no surprise that a lot of people get scared and pull out of their investments too early to find out later that this was a million-dollar mistake. The stock market isn’t some rich quick scheme. However, it is a space where you can build real wealth over time. Therefore, if you want to see real gains, it’s worth picking the right stock and holding on to it, especially if you can find a great stock that provides regular dividend earnings as well.

Underestimation

On the flip side and perhaps the most common mistake is underestimating just how low a stock can go. A lot of uninformed idiots think “These stocks can’t go any lower!” Newsflash, it most certainly can and will. If your stock is rapidly trending downward, cut your losses and move on! This is another reason why it is important to do your research beforehand. You have to understand the circumstances around the stock before buying it because it is possible that the stock price will drop some time after you buy it and never rise back again to the price at which you bought it. Even if the stock has done particularly well in the past, the way the world is moving may not permit success for that particular stock in the future. The fact of the matter is that some stocks never rebound. Don’t get stuck riding the stock all the way to the bottom.

All In all, if you want to avoid these mistakes, there are two important trends to remember:

Buy low and Sell high. While it seems simple enough, many people panic with market trends and tend to overreact. There’s no sure way to perfectly time the market, but it helps if you do the research and keep up with current events that could affect the market. Try your best to make wise decisions with your timing and avoid being the idiot that buys long after the bottom and sells long after the top has peaked and dropped.

Secondly, avoid falling into the Sunk Cost Fallacy. This is the idea that if you lose money on a stock, rather than looking forward, people look backwards. Don’t be stupid and hold on to try to wait years for the recovery that’s never going to happen. Instead, put your funds in a different stock that may have a better future outlook from the present time.

At the end of the day, stock markets for the majority of retail investors cater to the emotion in people, but you can’t let your emotions drive your decisions. Instead use this to your advantage to help you make educated predictions and take calculated risks. But, keep in mind that investing in the stock market is just that, a risk. Stock prices don’t always go up and that’s ok. Just be wise and know when to let it go. While the market generally does well over a long time period, timing is everything and will vary over a few days/weeks/months/years. Therefore, you have to do your part and figure out which stocks will be valuable in the time frame that you would like to keep them. Not every stock is meant to be kept for long term investment and not every stock is meant for short term returns. Ultimately, It is up to you to decide what is best for your investment goals. Regardless of what you decide, there is one thing that you should takeaway…avoid the 3 fatal mistakes above and you’re likely to do just fine.

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The Unprecedented Wealth Creation Opportunity of the Cannabis Industry is just getting started

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Cannabis prohibition is going to end much faster than most people anticipated, and this will allow for the biggest wealth creation opportunities in many lifetimes. When Prohibition ends, the dam holding back the Cannabis industry will have broken, and Cannabis will become ubiquitous in virtually every aspect of our society, worldwide.

Cannabis is extremely close being federally legal in the United States. 36 states have already decriminalized Cannabis, 11 of which have fully legalized it for medicinal and recreational purposes. In March of 2019, the House Financial Services Committee approved the SAFE Banking Act by 45-15. Earlier this month, 38 Attorney Generals from 38 U.S. states and territories signed a letter asking our Congress to pass legislation to increase Cannabis businesses’ access to banks, through the SAFE Banking Act.

Days earlier, the Treasurers of 17 states issued a separate call in support of the same bill. US Attorney General Barr stated he would not use federal resources to prosecute Cannabis businesses in states where it is legal. US Treasury Secretary Mnuchin urged Congress to pass the SAFE Banking Act. And finally, most Congressmen on both sides of the aisle are in favor of this Act passing through.

Cannabis products will disrupt multiple billion industries in the US, with the biggest changes taking place in medicine, pharmaceuticals, veterinary products, wellness and beauty, sleeping aids, packaging, banking, agriculture, advertising, food, alcohol, non-alcoholic beverages, tobacco, law, textiles and fashion/clothing, plastics, biodiesel and energy, paper, construction, sports products, tourism, and many more.

Most giants in each of these industries will inevitably become involved with Cannabis and adopt it within their existing offerings, as well as creating new Cannabis-based products and services. Food and soft-drink conglomerates like Nestle and Coca-Cola will create Cannabis-infused food, deserts and soft-drinks. Alcoholic beverage companies like Anheuser-Busch and Heineken will create Cannabis-infused alcoholic beverages. Textile companies like Admiral Sportswear, Nike, and Cone Mills Corporation will create hemp-derived shoes and clothing, and on and on. Thus, the companies that are currently establishing their footprint/territory and the technology of this industry will be prime acquisition targets for these giant corporations.

In addition to disrupting these existing industries, Cannabis will also create many new industries through new health and wellness products that combine CBD and THC substances. Cannabis and CBD are more commonly being used together in the creation a new worldwide health and wellness industry with a wide variety of plant-based consumer products.

Cannabis and hemp will become ubiquitous in our world. Almost everything in our lives as we know it will have a much improved, more durable, healthier version that is created with Hemp, Cannabis and its derivatives. There will be new infrastructure, new products, new healthcare (physical and psychological) treatment, new recreational activities, new foods, new productivity, new employment, new taxes and most important of all, a new life and culture.

Needless to say, the end of Cannabis prohibition will bring forth a political, economical, social and healthcare revolution in our world. We are entering an exciting new era, where Cannabis and hemp-based CBD are rapidly becoming an important part of an active healthier lifestyle. Patients will use medical Cannabis and receive much needed relief without the fear of going to prison for it. Adults can choose Cannabis for adult relaxation for a fraction of the cost and fewer of the negative effects of alcohol. Millions of people will sleep better and have less pain, children will be able to control their seizures and veterans will manage their PTSD.

This will create a new global health & wellness industry where hundreds of thousands are employed in an environmentally responsible new industry that produces a natural product, which is truly making the world a better and healthier place. New Frontier Data estimates that the legal Cannabis market in the United States will generate nearly 283,422 jobs by 2020. This will be more than the expected jobs created in all of manufacturing, utilities and government industries.

Such an unprecedented revolution to our world, will also bring unprecedented wealth creation opportunities. Just as most people underestimate the impact hemp and Cannabis will have on our real world, most investors underestimate the enormous investment opportunities this industry currently presents.

The most misunderstood element of this industry is the sheer scale of what the global Cannabis/CBD industry will be. What was projected to be a $25 billion global market is rapidly becoming $100 billion and could well go up to $1 Trillion over the next decade.

Grand View Research has published a study that shows Cannabis could become a $146 billion market (US and globally) by 2025. Based on a 20% profit margin and a 20x earnings valuation, the market cap of the global industry will be over $584 billion. In additional, there are approximately 180 Cannabis public companies in the US and Canada. If 100 of them become $1 billion dollar companies within the next decade, that could bring the total global Cannabis market cap to $1 trillion. From an investment prospective few new industries in history have offered the investment potential Cannabis offers in 2019.

Conclusion:

The Cannabis/CBD industry is entering a rapidly expansion cycle and the current market estimates are much too conservative. Cannabis prohibition will undoubtedly end, sooner rather than later. The myriad of recent positive developments in public policy suggests this will happen very shortly. Our politicians and Congressmen have the chance to create history, by bringing a long overdue end of Cannabis and hemp prohibition. They must vote to pass the SAFE Banking Act.

Investors realize the unprecedented opportunities for wealth creation in this industry, which is just getting started. This is an exceptional time to invest in the Cannabis market, as it seems to poised for a decade of remarkable domestic and international growth. Post prohibition, the Cannabis and hemp industry will go from today’s size of $10B, to the point where it will be absolutely ubiquitous throughout our society, products and markets – this exceptionally rapid development will create exceptionally large opportunities for Cannabis entrepreneurs and investors.

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Future of the VC Industry

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dont-follow-trends

FROM DISNEYLAND TO VC MANOR

Imagine gallivanting across Disneyland on a sunny March afternoon as the delightfully consuming scent of a fresh batch of popcorn kernels pop to perfection. The popcorn maker sits adjacent to the churros chariot that you’ve been evading all afternoon. Yet, this isn’t any ordinary trip to The Happiest Place on Earth. You’ve arrived early, the crowds are minimal and all the rides are operational. As you approach the renowned and recently renovated Indiana Jones ride, you are astonished to find a zero-minute wait and no line. Believe it or not, your timing was impeccable – Gather the troops, the 2 ½ minute Harrison Ford-themed adventure awaits.

HOW DOES THIS TRIP RESEMBLE THE CURRENT STATE OF THINGS FOR VCS?

Venture capital markets survived 2016 slumps, continuing on an onward and upward trajectory through 2017. The disruptors and catalysts with the emerging technologies come out on top. Although some disparity appears among volume and funds, the game play implications are massive. While a crowd-less Disneyland is unlikely, venture capital is thanks in large part to the current landscape.

As evident of Disney purchasing rival studio 20th Century Fox (the most significant cataclysm for the film industry in the 21st Century), VCs too aren’t short on cash. Lines are blurred and technology is changing the game for the industry – GET IT EARLY.

HOW CAN QUALIFIED COMPANIES GAIN A COMPETITIVE EDGE, AVOID DREADED WAIT TIMES AND TAKE A PIECE OF THE PIE? (theme park visit is optional)

Top 8 hand-picked Predictions for the Venture Capital Industry in the next decade:

  1. Technology/Big data/Automation etc. will continue driving M&A deals
  2. Full-stack professional services a trend evident by investor acclimate
  3. Venture funds will revive their passion for early-stage investments
  4. “Truly Great” companies will sidestep the venture funding circus altogether
  5. Investors receive larger stakes & are integral to the start-up team
  6. Increased liquidity, accountability and transparency is vital
  7. It’s a performance game folks. Personal + Professional Brand Synergy is instrumental
  8. Innovation, experimentation and crowdfunding lead to different types of VCs

For detailed predications and insights click here.

ON THE HORIZON

In the midst of the capital market’s landscape, regulatory overhauls, and record-breaking technology M&As with no sign of reprisal, 2020 will look very different than it does today.

Then, too, there is the surging stock market and, by extension, the rebound in technology IPOs. This has been fueled not only by a strengthening economy but by President-elect Donald Trump’s push to bolster the economy further by reducing taxes, streamlining regulations and sparking major infrastructure development.

Furthermore, the implications of evolving social organizations are worth noting. The New York based think-tank, Financial Policy Council (FPC) captures this trend in a June 2017 article titled, “Financial Power of Impact Investing.” It states:

“For many years the divide between instruments of philanthropy and investing has been clear cut. Investing strategies typically did not involve social organizations focused on non-governmental organization (NGO) concerns. However, the advent of millennial investing power, the rise of social enterprises, and the need for further asset diversification have blurred the line between both industries.”

Lastly, venture is still fairly segmented by geography. As localized hubs become more sophisticated and efficient, venture will truly be a global play.

What’s your power play?

CONNECT + CREATE:

Feature your brand and/or business:

  • Submit your thought-provoking, insightful, and note-worthy content or insights to contact@brandzainc.com or by simply including the hashtag – #VentureImpact in your comment below.
  • Diverse viewpoints and co-publications welcome. No industry, individual or inspiration is off limits.
  • Be featured in future publications.

Zana Nesheiwat is Founder of Brand ZA Inc., an integrated business solutions and impact-branding firm specializing in financial services, public policy, and technology. With global operations from Los Angeles to Dubai, the firm equips clients with intelligence and resources to effectively bridge business goals with turnkey brand strategy – driving growth across all touch points.

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Bitcoin: Drawing the Line Between Investors and Gamblers

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People who bought and held their .01 bitcoins from 2010 could have enjoyed an increase in value of 119,999,900 percent. If you spent $100 on the most popular digital currency then and didn’t sell or lose your fortune to hackers, your electronic coins might be worth about $120 million today. Those are pretty incredible returns, and few people regret buying a few bitcoins back in the day, holding onto them, and reaping the benefits. Of course, none of that offers any guarantees that the value of this or any other digital currency will continue to rise like this or even continue to increase at all.

Is Buying Bitcoin Investing or Gambling?

In fact, it’s possible to argue that the very thing that maintains today’s value is past performance. As you should know from reading any prospectus, past performance doesn’t ever guarantee future returns. If you can afford it and want to spend some money on digital currency, that’s your choice. However, you really should first spend some time considering what it really means to buy bitcoin.

When you buy some bitcoin, are you investing or speculating? In order to figure this out, you first have to decide if bitcoin qualifies as an investment. This question usually sparks a lot of contentious debates among people who are considered financial experts. Aswath Damodaran teaches at NYU’s Stern School of Business. He’s often referred to as the “Dean of Valuation” for his work valuing various assets.

Professor Damodaran divides all investments into four main categories:

  • Assets
  • Commodities
  • Currencies
  • Collectibles

He says it’s easy to dismiss digital currency like bitcoin as an asset, commodity, or collectible. This digital currency doesn’t generate income on its own like a rental property, an asset that you can touch. You can’t consider bitcoin a raw material like a commodity. It certainly isn’t a collectible.

If nothing else, Damodarian is willing to say that bitcoin might be a type of currency, but he also has gone on to comment that bitcoin isn’t a very good currency. These are some reasons that bitcoin hasn’t yet become a good currency even if it might be loosely classified as one:

  • It’s not that easy to trade nor commonly accept by most vendors.
  • If you do find vendors who accept it as payment, they probably won’t give you an actual price until the moment you want to make a trade just because the value is very volatile.

If bitcoin is an investment, it’s hard to classify. You might call it a currency just because it really isn’t anything else.

Professor Damodaran is not at all a fierce critic of electronic currency and doesn’t believe it’s any sort of fraud or Ponzi scheme. He just says it’s impossible to value right now. You can only trade it or price it. You can find many tougher critics than Damodaran, so it’s worthwhile to consider the words of a fairly unbiased scholar and recognized expert in the field.

He does say that if future technology makes it easier to spend bitcoin or other electronic currencies, he might offer a revised opinion. Still, it might be that blockchain technology and not the electronic currency that really has the value. If that’s true, another electronic currency or even a different kind of technology could replace bitcoin.

Should You Regard Bitcoin as an Investment or Speculation?

Just as you know, you should never sell in a panic, it’s also prudent to be wary of buying in a panic. Right now, you might regard bitcoin as something that’s interesting to study or even risk whatever you can afford to lose. If you want to invest in order to secure your retirement, earn profits, or meet other financial goals, you should probably look for something that’s easier to classify as an investment. More important, you will probably be prudent to find an investment that’s easier to value.

If experts are having a hard time telling if or when this will all come crashing down, it can be easy to see this as a gamble. Some people are fine with putting their savings on the line in hopes that things will go the way they guess, but more savvy investors will typically take the “boring” route and put in the hard work required to ensure their financial growth.

Now you know

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The Financial Power of Impact Investing

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For many years the divide between instruments of philanthropy and investing has been clear cut. Investing strategies typically did not involve social organizations focused on non-governmental organization (NGO) concerns. However, the advent of millennial investing power, the rise of social enterprises, and the need for further asset diversification have blurred the line between both industries. Environment, Social, Governance (ESG) investing, informally known as impact investing, is on the rise with both active and passive investors. For example, ESG assets under supervision at Goldman Sachs have grown from US$3.8bn in 2015 to US$6.5bn end of fiscal 2016. As Goldman Sachs poignantly stated, ESG investing is now mainstream even within the pension fund and insurance sectors.

Even though financing social causes has overlapped between philanthropy and ESG investing, by no means is the latter non-profit seeking. First, while impact investing may dive into sectors once thought as solely philanthropic, let us make it clear that the investing strategies used to generate returns do not veer from tradition asset management practices. Specific return objectives are set, even if the companies that are in the portfolio may comprise all social enterprises. In fact, Goldman Sachs recommends that investors should be even more aggressive with risk/return analyses when it comes to ESG portfolios, to ensure even more accountability. Traditional sectors tend to put the bottom line first by nature, so it is of utmost importance to hold for-profit social enterprises accountable for revenue and profit estimates.

U.S. Trust’s “Impact Investing: A Guide To Doing Good While Also Doing Well” gives an excellent overview of impact investing. According to the U.S. Trust, managed U.S. assets committed to impact investing in total grew from US$640 billion in 1995 to US$6.57 trillion at present. Impact investing can be broken down into further categories of socially responsible investing (SRI), faith based investing, green investing, and values based investing (VBI). For example, an investor who is against tobacco use but is not necessarily pro-environment may seek investment in an SRI portfolio, but not a green portfolio. As with traditional ETFs and mutual funds, diverse social investing asset classes are available via equities, bonds, REITs and even private equity. Investment funds including these ESG options in have indeed increased from 55 to 925 within the last two decades. In particular, U.S. Trust’s ESG investor pool jumped 23% from 2015, with a whopping 93% of millennial investors who have added ESG components to their portfolios!

ESG investing is an excellent mechanism to be considered by shareholders through engagement and by Board of Directors through guidance and governance. Rick Scott, Vice President of Finance and Compliance at the McKnight Foundation, gave great insight as to the need for adding and monitoring ESG components to investment strategic directions at the Board level. The McKnight Foundation has allocated 10% of its US$2bn portfolio strictly to impact investing with a focus on US clean water and carbon footprint. Scott enlightens that the Board must call for a “triple bottom-line for financial, programmatic, and learning return.” Boards must have an investment or risk committee assigned to give oversight on risk/return objectives specific to the triple bottom line, and with C-Suite determine the healthy mix of ESG and traditional components for portfolio investments. We have said time and time again that clear internal corporate governance goals and procedures, in this case adopting a “triple bottom line” approach, is the most pertinent form of corporate social responsibility an organization can practice.

While global institutional investors have now become ESG investing stalwarts, retail investors, individual private investors, and minor shareholders may still need direction in how to effectively embark on the ESG investing journey. In addition, the ESG investing sphere has been known to be have quite a few ‘greenwashers’ with more public relations talk than actual profit generating. As with any investment vehicle, extensive research is recommended. Global investment firm Cambridge Associates has developed the Impact Investing Benchmark which comprises 51 private investment closed-ended funds dealing strictly with the intent to generate social impact. From this data, Cambridge Associates created and MRI Database, and uses ImpactBase extensively as well. U.S. Trust as well has developed benchmarks via an IMPACTonomics™ program, which has specific in-house and third party impact investing platforms such as the Breckinridge Sustainable Bond Strategies and IMPAX Global Environmental Markets Fund.

Many have the misconception that impact investing precludes investing in traditional industries, such as the fossil fuel and mining industries. Absolutely not! The smart and savvy investor must see diversification opportunity in line with tailored return objectives. There is financial power in such comprehensive asset management. The end point is return on investment, whether from most profitable traditional, social, and technologically advanced companies in the market. A gold mining company with a strong, proven corporate responsibility background can share the same portfolio as a profitable microfinance company that lends globally to small entrepreneurs. Again, the crux of investing in any asset class lies with return objectives. ESG investing, like smart technology, is no longer the niche market. As Rick Scott and Goldman Sachs put it, the point is to find the “right tools for the right time.” The time is right to consider impact investment vehicles in tandem with traditional market portfolios.

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