If you are an investor in stock market, you must know that your investment is at risk. The losses definitely happen in almost every case in one form or the other. Many times the investors don’t realize that they are going through financial losses by investing in stocks.
Capital loss: The direct and simpler form of loss in stocks is the capital loss where you lose your capital. If you put your money in stocks and their price goes down, now it depends on you to decide whether you want to continue holding them and wait for the prices to go up or you want to end up by selling them bearing smaller loss.
Loss of opportunity: many times it happens that when you purchase stocks and after a certain period of time you see that the prices are still the same. This is also possible that during the period, the prices may have faced fluctuations. At this point, you can do nothing to do but to satisfy yourself that you haven’t gone through any losses through out.
But actually, you remain at loss. Investing in stock means you are putting your money a risk. If you would have invested your capital at a risk-free place like in U.S treasury bonds, you would have earned a little amount in the end without putting your capital at risk. So now you can analyze the amount of money you have lost.
It is an indirect kind of loss as you have actually missed the chance to earn profits over the same capital if you had invested at the right place.
Loss of missed-profits: it usually happens with the stocks that are highly unstable and their prices fluctuate greatly and frequently. There are a very small number of lucky people who can rightly sense the peak of the stock market. Many investors, when see a rise in the price of stocks, decide to wait further wishing to get most out of their investment. And when there is a fall in the value of stocks, you would feel that you could have saved yourself from loss by selling at the right time. Still, there are people who choose to wait for the better time to come when they can earn more profits.
It is advised that you should not wait unnecessarily in greed of maximum profits. It can be too risky. Sell out your stocks if you are getting reasonable profits.
Paper loss: paper loss is when you buy stocks at price higher than their actual value. It is then up to you whether to keep the stocks or to sell them with little loss. You must analyze first before taking any decision. If you find the potential in the company to make profits in future, only then you should keep the stocks. Otherwise prefer to bear small loss by selling the stocks and then invest your money at a better place.
It is necessary to do research and analyze the company’s growth when buying stocks, but it is unreasonable to think that you wouldn’t bear any loss throughout. Smart investors learn to cut down their losses but none can avoid them completely.