Investors who invest in stocks, whether they are full-time or part-time, are most afraid of bankruptcy due to buying and selling stocks.
Perhaps you, as you read this page, are afraid of going bankrupt or suffering significant losses from buying or selling stocks as a result of investing in stocks.
In fact, it’s normal to be afraid of bankruptcy by buying or selling this stock. Because if you lose your property by investing in stocks that you started with the purpose of increasing your assets, you will be completely overwhelmed .
The story is based on the premise that “bankruptcy by buying and selling stocks is nonsense”, but since there are several patterns of bankruptcy by buying and selling stocks, if you understand those patterns, it will be bankruptcy. It never reaches.
In short, if you want to prevent stock bankruptcy, you can learn bankruptcy patterns .
Based on this point, this page summarizes the patterns that lead to bankruptcy in stocks and the tips to prevent the occurrence of large losses.
Table of contents
- Summary of 4 patterns leading to bankruptcy with 1 share
- 2 Stop-loss insurance
- 2.1 “Give up” helps prevent bankruptcy
- 2.2 Safe if you have a stop- loss insurance
- 3 Can’t manage funds
- 3.1 What is money management in the first place?
- 3.2 Maximum drop in stocks of any company is 0
- 3.3 Problems are exception cases and unforeseen circumstances
- 4 Invest in a specific stock
- 4.1 Diversification is important for risk hedging
- 4.2 Buy stocks of different genres
- 5 Trying to recover the loss
- 5.1 The cause of debt is the accumulation of losses
- 5.2 One loss is not a failure
- 6 Real record! Relatives’ failure stories
- 6.1 Buy a large amount of Livedoor stock
- 6.2 Forget to put a limit price from pride
- 6.3 Outbreak of livedoor shock
- 6.4 Get out of shock
- 6.5 Blocking all sides with a bee on the crying surface
- 6.6 Escape by canceling the time deposit
- 6.7 Causes are pride and defeat
- 7 Best Bankruptcy Prevention Uses Investment Advisers
Summary of 4 patterns leading to bankruptcy in stocks
As you can see in this heading, there are basically only four patterns of stock bankruptcy, with exceptions. In other words, if you understand the four bankruptcy patterns, it is unlikely that you will go bankrupt by buying or selling stocks.
So what are these four bankruptcy patterns? In order to understand this point, I have listed four types of representative cases that lead to bankruptcy in the stock trading field .
- I will neglect to stop loss
- I can’t manage my funds
- Invest in a specific stock
- Trying to recover from failure
The details of the four types of bankruptcy patterns discussed here will be introduced in order from the top.
I will neglect to stop loss
The typical case of bankruptcy (large loss) with the stocks introduced first is not to stop loss.
What is this stop-loss insurance? Simply put, it means fixing the loss and letting go of the bad stock . In short, it is the act of “giving up” with a positive meaning.
“Give up” helps prevent bankruptcy
At first glance, this act of “giving up” may seem negative, but it is an essential stance in order not to go bankrupt with stocks.
This is because in the world of stocks, there are often mysterious price drops and indescribable plunge patterns on the part of investors. In such cases, bankruptcy can easily occur unless the act of “giving up” is taken .
One of the typical cases that would lead to bankruptcy if you do not give up is the case of TEPCO, whose stock price plummeted due to the 2011 Tohoku region earthquake.
In fact, before the earthquake, TEPCO stocks were attracting attention from institutional investors as ultra-stable stocks. However, as you know, the stock price fell to a fraction of its heyday due to the earthquake.
Safe if you have a stop-loss insurance
Of course, there were many investors all over the country who suffered a loss close to bankruptcy due to this crash, but since the earthquake cannot be predicted, it can only be said to be unlucky in a sense.
But these bad lucks often happen in the stock world. For that reason, it is essential to anticipate bad luck and properly hedge risks in order to prevent bankruptcy in stocks.
An automatic stop-loss setting that uses limit orders in advance for the risk hedge and specifies the selling price . If you do this, if the stock price drops to the specified amount, the stock will be sold automatically and you will not go bankrupt.
Considering this point, if you are afraid of bankruptcy, I would like to set up the sale of your shares first.
I can’t manage my funds
The second point to prevent bankruptcy is money management. Here’s why money management is important in preventing stock bankruptcy.
What is money management in the first place?
In the first place, managing funds in stock investment means managing your own assets and devising ways to prevent bankruptcy even if your stocks collapse .
For example, if your monthly income is 400,000 yen, your expenditure is 300,000 yen, and your deposits and savings are 1 million yen, what happens if you convert all the surplus funds of 1 million yen into stocks?
In this case, there is no problem as long as you have income, but if “loss of income due to restructuring etc.” and “stock holdings plunge” occur at the same time, you will go bankrupt in one shot.
In other words, this is a situation where funds are not managed. Doesn’t this story just tell you that money management is very important to prevent stocks from going bankrupt?
The maximum drop in stocks of any company is 0
This is just a principle case, but in the world of stock investment, stocks alone do not bear debt.
This is because even if the issuing company of 1000 yen per share goes bankrupt, the shares themselves will run out of paper, but that is why they will not be in debt or go bankrupt. In short, stocks alone are unlikely to lead to bankruptcy .
Considering this principle, there is no problem in thinking that the probability of bankruptcy is zero if you are involved with stocks within the range of surplus funds.
The problem is exception cases and contingencies
In principle, stocks do not go bankrupt due to direct causes, but in exceptional cases and unforeseen circumstances, they can go bankrupt. This does not apply the principle of “stock is not can lead to bankruptcy because of” the case will introduce the future for.
Margin trading has infinite risk
First of all, the exception case is the case of using margin trading.
If you use this margin trading, you can buy and sell stocks on a much larger scale than the original one, so it is possible that you will go bankrupt.
Considering this point, if you are afraid of the risk of bankruptcy when buying and selling stocks, I definitely want to avoid using margin trading.
Have 3 months worth of cash
And the second point to prevent the risk of bankruptcy is to have enough savings to withstand three months even if “no income” and “stock runs out of paper” occur at the same time.
In fact, the cause of bankruptcy due to stocks is that in most cases, you cannot pay interest by borrowing money from black money or consumer finance because you have run out of funds. In short, the cause of bankruptcy is not stocks, but short- term funds .
With this in mind, if you have enough cash to withstand running out of paper, you will not go bankrupt even if your stock runs out of paper. One guideline is to save for 3 months.
Considering this point, if you are afraid of bankruptcy, we recommend that you secure surplus funds for at least 3 months, and at best 6 months in cash, and then work on stocks.
Invest in a specific stock
The pattern of bankruptcy with the third stock is to put one on a specific company stock, saying “Hey!”.
If you do this one and the stocks you buy soar, you could be a millionaire, but it’s not that sweet to the world. Bankruptcy is much more likely than the odds of becoming a millionaire.
Diversification is important for risk hedging
In the first place, as the headline suggests, diversification of investing corporate stocks is essential to prevent the risk of a stock market crash. This is natural when you think about it.
For example, what happens if you invest 20 million yen in the stock of TEPCO, which you mentioned earlier, and the stock price becomes a quarter after the investment?
In this case, the value of the stock of 20 million yen will be a quarter of 5 million yen, so a loss of 15 million yen will occur. Doesn’t this seem like a bankruptcy loss, if not a bankruptcy?
On the other hand, what happens if you invest 20 million yen for 2 million yen each in 10 companies and the stock of one of them, TEPCO, becomes a quarter?
In this case, the value of the stock of 2 million yen is 500,000 yen, so the loss amount is 1.5 million yen. This loss is painful, but it never leads to bankruptcy because the investment is part of the asset .
Buy stocks of different genres
As I have introduced so far, if you are afraid of a large loss that will lead to bankruptcy when buying and selling stocks, diversified investment to invest in multiple stocks is essential. And the key to smoothing this diversified investment is to invest in corporate stocks of different genres.
For example, if you invest in TEPCO, you will buy stocks in a genre different from infrastructure.
The advantage of dividing this genre is that if you buy only stocks in a particular industry, the value of all the stocks you own will drop if the credit of that industry is lost, and the cumulative loss amount can be serious.
Considering this risk, it is a royal road to divide the genres of stocks to purchase . By the way, it is desirable to purchase about 5 to 10 types of brands, but if your budget is limited, you can use about 3 types.
Trying to recover the loss
The fourth act that leads to bankruptcy in buying and selling stocks is trying to recover the loss.
In fact, this “act of recovering losses” is the most dangerous act of buying and selling stocks, which has the highest risk of bankruptcy. I will explain why the recovery of this loss leads to bankruptcy .
The cause of debt is the accumulation of losses
As I have said many times, since the maximum loss amount for buying and selling stocks is the total amount of principal, it is unlikely that the result of buying and selling stocks alone will lead to debt.
However, once you make a big loss on stocks and borrow military funds to buy stocks from consumer finance to make up for the loss, you are on the road to bankruptcy.
In fact, most people who go bankrupt with stocks are not the bankruptcy of the stock itself, but the cause is often a shortage of funds due to using a card loan etc. to compensate for the loss of the stock.
Considering this point, if you are afraid of bankruptcy , it is indispensable to take a stance of buying and selling stocks with the spirit of “never trying to recover the loss” .
One loss is not a failure
However, no matter how much “it is important not to recover the loss”, if a big loss occurs, it may not be possible to say such a wealthy book.
Therefore, as an individual manager, it is recommended that you write a piece of paper on your computer screen stating that “one loss is not a failure” when you work on buying or selling stocks.
You might think “Hmm?” When you see the sentence “One loss is not a failure”, but this is a clear fact. This is because there is data that even stock professionals have 6 wins and 4 losses in the trading record of stocks .
However, we try not to lose a lot by reducing the loss of 4 wins. In short, even if you make a loss by buying and selling stocks once, if you make a total profit, you will win in stock investment.
Given this point, isn’t it ridiculous to be overwhelmed by immediate loss, a level of failure that does not directly lead to bankruptcy?
Veritable records! Relatives’ failure stories
So far, we have introduced four typical patterns that lead to stock bankruptcy, but just knowing the bankruptcy pattern does not convey the actual situation of bankruptcy through stocks.
Therefore, in order to let you know the real case of bankruptcy caused by buying and selling stocks, we will introduce a case where a relative of the manager was driven to the brink of bankruptcy by buying and selling stocks .
Buy a large amount of livedoor stock
The relatives of the manager who appeared in this case were originally people who were completely ignorant of investment in general, let alone stock investment.
However, in 2005, when my relatives were interested in buying and selling stocks, there was an IT bubble, and there were many venture company stocks that enjoyed the IT bubble with Livedoor CyberAgent, so I was fascinated by the stocks so that I could be obsessed with them. is.
In particular, the relatives of the caretaker seemed to like the character of “Horiemon”, a relative of Livedoor, and bought a large amount of Livedoor stock with the meaning of his support.
Moreover, he was so enthusiastic that he bought shares of Livedoor using margin trading, not within the range of surplus funds . It’s just a bubble.
Forget to put a limit price from pride
At the time of purchase, the price of Livedoor stock increased due to the popularity of Horiemon in addition to the improvement of Livedoor’s business performance.
This price increase made me ecstatic, and it seems that the relatives of the manager forgot to specify the “limit price”, which is an absolutely necessary point in the world of stocks.
That should be the case, and I had predicted that the stock price would rise forever, so I was overconfident in Livedoor stock, saying , “I don’t need a stop-loss insurance!”
In fact, this extraordinary overconfidence in Livedoor stock was the first step towards the nightmare of bankruptcy.
Outbreak of livedoor shock
In January 2006, Yahagi’s relatives were hoping for an eternal price increase, and a livedoor shock occurred.
To briefly explain this livedoor shock, it was a case in which an administrative agency entered the Livedoor headquarters on suspicion of violating the Securities and Exchange Law, and as a result, the stock prices of IT ventures such as Livedoor stocks plummeted.
Get excited from shock
If you stop with a loss of 13 million yen, you will never go bankrupt, but in a situation where the savings of 15 million yen is reduced to 2 million yen, ordinary people cannot stay calm.
It was the same with the relatives of the caretaker. As a result, he said that he would do Forex to recover the loss of stocks with Forex.
However, not to mention stocks, FX is not so sweet that people who were not interested in investment in general can easily win. Naturally, even if you play forex, you lose, and as a result, you not only recover the loss of stocks, but also reduce your savings to near zero.
It seems that he was able to prevent the loss that could not be revived because he was stopped by a family he could not see, but he was investing in living expenses and it seems that he could not pay the house loan, so he took money from multiple consumer loans to survive for the time being To borrow .
It’s just before bankruptcy. And, in fact, he was thinking about his own bankruptcy.
Bee on the crying side
Of course, relatives who were mentally driven by the repayment of loans borrowed from consumer finance and the white eyes of their families continued to fail in their main business.
He was the deputy chief of a listed company at the time, but his loss in stocks made him mentally unstable, and he was taken off the career track and forced into a sinecure. Thanks to this, my motivation for work has dropped.
Moreover, his company’s business performance has deteriorated, so a large cut in bonuses will significantly reduce his main business income. It is exactly the form of unhappiness and unhappiness.
This is the impression of the caretaker himself , but the relatives at that time were not animated and it was a tension that could commit suicide at any moment .
Escape by canceling the time deposit
A lucky event happened at the very end of a relative who was on the verge of bankruptcy both mentally and financially.
The lucky event was the cancellation of the “time deposit” that his wife had secretly saved. It seems that the relatives of the manager did not know about the cancellation of this time deposit, but this time deposit is about 4 million yen, which is exactly the same amount as the amount borrowed from consumer finance.
With my wife’s fine play, I was able to escape the worst, such as my own bankruptcy and letting go of my home.
However, it goes without saying that the savings, which originally amounted to more than 15 million yen, were lost in stocks, forcing us to review the design of our lives in the future . In that sense, it is no exaggeration to say that it is a de facto bankruptcy.
The cause is pride and defeat
I have briefly introduced how the caretaker’s relatives were forced into bankruptcy with Livedoor stock, but the problems in his case can be summarized in these four points .
- Having started margin trading
- Sweetness that does not think about unexpected situations
- I couldn’t tolerate the loss
- I couldn’t talk to anyone
First of all, it was quite painful to start margin trading easily. If I didn’t do this, it wouldn’t hurt that much.
The second “sweetness that does not consider unforeseen circumstances” corresponds to the fact that we did not specify the loss cut because we believed too much in the rise in stock prices. With this stop-loss, the amount of loss was within the permissible range.
And the biggest mistake was “the loss could not be tolerated” . Because of this, I ran into a violent attempt to recover the loss of stocks with FX, and finally I was driven to the point just before bankruptcy.
And it was also a problem that I didn’t tell anyone about the loss of stock. It would have been a little better if I could talk to someone about the stock failure right away.
Best Bankruptcy Prevention Uses Investment Advisers
So far, we have introduced four patterns that lead to bankruptcy by buying and selling stocks and episodes of relatives of the manager who were driven to bankruptcy with stocks.
Aside from the story of the caretaker’s relatives, if you don’t want to go bankrupt with stocks, you need to keep track of the four patterns that lead to bankruptcy. For that reason, I have re-listed the four patterns that lead to bankruptcy that I introduced this time, including the meaning of review .
- Do not stop loss
- I can’t manage my funds
- Invest in a specific stock
- Trying to recover the loss
However, it is another story whether bankruptcy can be prevented even if you know the cause of bankruptcy. Moreover, no matter how much you prevent bankruptcy, if you get hot in the actual trade, you may unintentionally lead to bankruptcy.
Considering this point, if you are afraid of bankruptcy due to buying and selling stocks, we recommend that you seek the advice of a stock professional .
By the way, this stock professional is an investment adviser who supports stock investment by individual investors. In fact, if you make a contract with this investment adviser, you will be notified of effective diversified investment and loss cut timing from stocks whose prices are rising.