The Motley Fool

3 ways to lose everything in the stock market

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.

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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.