3 ways to lose everything in the stock market

Some investors are really good at losing big money, quickly. I’ll let you in on some of their secrets.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Woody Allen famously said that “a stockbroker is someone who invests other people’s money until it is all gone.” Now, we at The Motley Fool don’t believe in getting someone else to manage our money for us, so here are three ways you can lose the lot all by yourself.

Get rich quick

Most of the non-investing people who’ve asked me about the stock market seem to think of it as a high-risk way to become a millionaire overnight. In fact, I’m thinking of offering a service where, for the price of one pound, I’ll answer the question “what’s the next share that’s going to skyrocket?

My answer will be “I’ve no idea, you’ve no idea, nobody has any idea, so forget about it.” I think that answer is worth a pound, and judging by the number of times I’ve already been asked, the venture might at least buy me a few drinks.

Anyway, yes, pile your cash into the latest hot stock your mates at work are talking about, ideally when the price has already soared so far that it’s a topic of pub conversation. I can almost guarantee you’ll get rid of all that bothersome cash in no time.

Bet the farm

Some successful investors have made a mint by being very cautious, keeping away from anything where they see risk, and occasionally going for a big ‘bet the farm’ investment. But don’t worry, providing you don’t possess their skills, you can use the same technique to throw all your money away.

One acquaintance who approached it this way during the dotcom boom kept making big investments in whatever internet stock seemed to be booming most at the time. Needless to say, he successfully managed to get the most money in at the peak of the market and lost almost all of it.

Another serially made such big bets, and after a few months recovering from each failure, would start eyeing up the next one and get so emotionally attached to it that he couldn’t resist. The last of his investments that I know about was a big one, even by his standards. The company went bust, providing him with a perfect 100% loss.

Day trading

If you don’t think you’re good enough to pick the very worst short-term investments and pile all your money into them, there’s a tried and trusted method that will allow you to chip away at your savings gradually. All you have to do is buy and sell shares frequently, and the beauty is that it doesn’t even matter which ones you go for.

Many brokers charge around £10 per transaction these days, and you’ll have to pay 0.5% stamp duty on purchases. So if you invest £1,000 in shares, you’ll pay an extra £15 in charges. Then when you sell them, you’ll pay another £10 (there’s no stamp duty on selling).

You only have to repeat that 40 times and you’ve got rid of a full £1,000. Some enthusiasts even trade on daily basis, and they’re so good at it that not a single one of them has ever got their name on the list of all-time great investors.

But, if you actually want to make money rather than losing it, the Motley Fool has lots of ideas, every day, even at the weekend.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Views expressed in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »