Why retail investors miss out on big profits in the stock market?

Retail investors often hear stories about people who turned their fortune around by investing in the stock market. There are often stories about people who invested their money in stocks such as TCS, Infosys, HDFC Bank, etc. in the 2000s & their investments turned into many Crores! However, most retail investors do not find such success when they start investing in the stock market by themselves. In fact, they often miss out on the big profits which the stock market has to offer!  What are the reasons which cause retail investors to miss out on big profits in the stock market? 


1. Lack of future vision

This is the biggest reason why retail investors miss out on big profits. Retail investors focus on the noise in the stock market such as the latest news about a stock, broker’s advice on the stock, TV commentary on the stock, etc. This noise in the stock market is temporary and changes everyday depending on the sentiments of the stock market participants. Bad news about a company might lead to a temporary sell-off but that might not change the long-term perspective of a stock. 

Retail investors generally focus on the short term noise of the stock market & completely miss the long term vision. Consider a stock such as Asian Paints which has been a consistent compounder over decades. There have been bad news & rumours about this company many times over the last few decades. However, only the long-term investors who focus on the future vision of the company were able to make huge profits in the stock. Novice retail investors would have left the stock on the first bad news & were never able to enter again. 


2. Lack of patience 

Lack of patience goes hand in hand with the lack of future vision amongst retail investors. Retail investors want to get rich quickly! But it is simply not possible to get rich quickly in the stock market. Wealth creation is a slow process in which there will be many setbacks (market corrections and crashes). There is no method in the stock market in which an investor can make incredible wealth overnight. 

This lack of patience causes a retail investor to lose out on their profits. Every retail investor wants a multibagger in their portfolio but they do not have the patience to hold the stock for a long duration. Here is an example of one of the best consistent compounders in the Indian stock market – Asian Paints. 

This stock has been a consistent compounder, still it has corrected multiple times over its journey to the top. It can be easily seen that the stock has corrected over 10 times over the last 2 decades. However, the shareholders of the stock are still sitting on a huge profit. Big profits will ALWAYS come over time. Trying to achieve a big profit in a short duration typically leads to destruction of wealth. 


3. Thinking of stocks as a lottery ticket 

Most retail investors do not do their own research before investing in the stock market. They listen to news, other people’s advice, brokerage agencies, etc. to make their investment decisions hoping to make a good return. However, the best way to make money in the stock market is to do your own research. Stock market should be treated as a serious business rather than a gambling house. 

Many retail investors buy any random stock just because they saw some news about it. They hold their stocks in the hope of making money rather than understanding the business. Buying something & hoping for getting rich is exactly what lottery players do! Investment should be done with a proper understanding of the companies & their business models. 


4. Trying to earn money the hard way

Retail investors love to earn money the hard way. Rather than investing in sound businesses which have been performing well over the years (many Nifty 50 stocks), they love to invest in small, unknown companies based on a rumour. If a retail investor is given a choice to invest in a fundamentally sound company such as Reliance Industries or a debt ridden company such as Reliance communication, most retailers will choose RCom! There is a pleasure which retail investors find by investing in companies which have not been performing well hoping for a good return after a turnaround story. 

Money is earned in the stock market, simply by using the basic principles of investing. A smart investor finds good companies which have sound business models & are available at a reasonable valuation. To learn more about choosing your first stock, visit this article! Instead, most retail investors try to find a debt-ridden (sometimes even a bankrupt company) hoping that the company is available at a cheap price. A retail investor finds more pleasure in earning Rs. 100 from Yes Bank than he/she finds in earning Rs. 1000 from HDFC Bank! Focusing on poorly performing companies with shaky business models causes retailers to miss out on big profits in the stock market. 


5. Trying to buy at the bottom and sell at the top

Retailers love bottom-fishing! Buying at the top and selling at the bottom gives retailers bragging rights. There is nothing more satisfying than telling people that you sold a stock exactly at the top. However, here is the truth – nobody can predict the bottom & top of a stock! To learn more, visit this article – Can anyone predict the stock market? 

Trying to buy at the bottom and sell at the top often results in regrets amongst retail investors and forces them to buy and sell again and again in the hopes of making the most accurate prediction. A smart investor’s goal should be to invest at an opportune moment for the long term because that’s how long term wealth will be created! You stocks will not become a multibagger if you sell your stocks on every top which the stock makes.


6. Focusing on trading over investing

Retailers always prefer trading over investment due to the thrill involved in trading. Investments are, by their nature, very boring. You just invest money in a stock & then just hold it patiently. This method of wealth creation is very boring for most retailers. This is why retailers get attracted towards the world of trading. Many retailers think that traders regularly make 5-7% return every day because many stocks can move 5-7% (even more) everyday! However, over 90% traders end up simply losing their hard earned money. Long term investments provide compounded returns to the investors which often gets ignored by retail investors. To learn more about compounding in the stock market, visit this article – How compounding works in the stock market? 

There is nothing wrong in stock trading, however long term investments should be an equally (if not more) focused as trading. Most wealthy individuals who have created long term wealth became wealthy by investing their money in fundamentally sound stocks. A good rule of thumb is to have only 20-25% of your entire capital as trading capital & the remaining 75-80% capital should be completely focused on long term investments. If you are a trader who wants to learn about a professional system of trading, visit this article!


7. Regretting on missed opportunities

Retail investors always focus on missed opportunities rather than new opportunities. As a retail investor, there is absolutely no lack of opportunities in the stock market for a smart, patient investor. Most people focus on the lost opportunities and regret their decision of either investing (in a falling stock) and not investing (in a rising stock). The focus is not on learning about the stock market, rather only on the missed opportunities. 

Stock market is an ocean of opportunities where many stocks break-out, break-down, rise, fall, etc. every single day providing many opportunities to investors and traders alike. A smart investor should focus on future investment ideas & not worry about past mistakes. 



Retail investors make many mistakes which causes them to lose out on the awesome profits which the stock market has to provide. A smart & patient investor who is focusing on the long term investment strategies by investing in fundamentally sound stocks will always make good returns in the stock market. The retail investors should focus more on learning & improving their skills to make bigger profits, rather than focusing on news, rumours, agency recommendations, etc. However, the final investment decision depends entirely upon the reader. 


If you liked this article, share & subscribe to this website! Follow us on Twitter!

DISCLAIMER : I am not a financial advisor. I am not for or against any company which I have mentioned in this article. All the information provided here is for education purposes. Please consult a financial advisor before investing.

How useful was this post?

Click on a star to rate it!

Average rating 5 / 5. Vote count: 5

No votes so far! Be the first to rate this post.

Namit Pandey

One thought on “Why retail investors miss out on big profits in the stock market?

Leave a Reply

Your email address will not be published. Required fields are marked *