Discover the key pitfalls that new investors encounter in stock picking and learn how to avoid common mistakes that can lead to significant losses.
If you’re eager to get into the stock market because you’ve heard it’s a fast-track to wealth, think again. The reality is that the majority of individual stocks result in losses over the long term.
This was revealed in a recent article by Hendrik Bessembinder, which analysed the investment outcomes of 29,754 common stocks listed on U.S. public markets from 1926 to 2025. The study, which measured both compound buy-and-hold returns and shareholder wealth creation in dollar terms, found that long-term investors in nearly 60% of stocks experienced a reduction in wealth over the period.
In my opinion, first-time investors are especially vulnerable to underperforming stocks. Without a clear understanding of basic valuation metrics like P/E ratios and cash flow, it’s easy to fall victim to meme stocks, mistaking a “popular” brand for a “good” stock, a recent example is Space Exploration share (SPCX), a Nasdaq listed share that IPO’d in June which has seen notable volatility (decrease of more than 20% of the high) due to the connection to Elon Musk. At the same time, not understanding the importance of risk mitigation and diversification means beginners often concentrate too much capital in a single volatile asset or sector. Added to this is the dangerous belief that the market will deliver quick riches, leading new investors to take on extreme risks in hopes of instant outsized returns.
