Wednesday, July 16, 2008

How You Lose Money In The Stock Market

The biggest reason you lose money in the stock market is if the company you invest in goes bankrupt. If you have invested in solid companies, you just have to ignore the volatility that sometimes shakes the stock market. No market always goes up, or goes straight up. No market always goes down, or straight down, for that matter. There are always gyrations in stock markets.

If you notice, in the western world, our markets have consistently, on a long term basis gone up. What kills markets is if a country is invaded or if a country goes bankrupt. I do not think that either is going to happen in Canada.

In bear markets, stock prices for growth-type companies fall further than stock prices for value-type companies do. If you are invested in dividend paying companies, stock prices fall more for companies that cut dividend, than stocks prices on ones that do not cut their dividends.

If a company cuts their dividends, their stock price will be depressed for a few years. An example is TransCanada Corp (TSX-TRP). If a company cuts their dividends completely, their stock price will be depressed for quite a few years. An example is Bombardier Inc. (TSX-BBD.B). For dividend paying companies, it often depends on how much they cut their dividends and for how long they cut their dividends.

Over the next few days, I will talk about these companies (TransCanada Corp and Bombardier Inc) and put up their spreadsheets.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional.

See my website at for a list of the stocks for which I have put up spreadsheets on web site.

No comments:

Post a Comment