Is stock investing a layman's job?

Whenever the bear market hits, we hear from many retail investors that they never made substantial wealth from the equity markets over the years or decades, based on individual experiences. Whatever notional gains made in bull market simply evaporate for many retail investors in the bear phases.

This leads us to a question whether stock investing is a layman's job. It is worth dwelling on this core issue as it is very sad to know that many retail investors have lost as much as 70% in many stocks in the last 52 weeks. For instance, stocks like Hindalco, Vaibhav Global, Kitex Garments, ABG Shipyard, etc., have lost anywhere from 56% to 79% from their respective 52-week high prices. The list of wealth erosion in this market includes companies of good managements as well as the ones which have governance issues. Hence, the recovery of principles in some of those companies may remain as a distant dream for many investors.

Still, what makes some retail investors burn their wealth in the equity markets? It is the behavioral aspect of investing. A well-respected doctor with decades of proven experience had questioned me why people like me do not give him a "minimum guarantee of returns" in the stock markets when he is able to give minimum guarantees to his patients for certain surgeries. It seemed to be convincing him when I explained that he could control, at least, a few parameters like blood pressure and sugar levels before surgeries are conducted. For an investor, nothing seems to be under reasonable control – a single-line statement from the President of European Central Bank or action/inaction from the US Fed or sudden downward circuit breaker in the Chinese stocks markets or unexpected adverse quarterly results (recent example being Crompton Greaves), etc., can destroy investments in individual stocks by as much as 30% in matter of two days. These days, losses in a matter of one or two days from some stocks match as much as two years' average returns from the stock markets.

Still many retail investors invest in equities just based on what they hear on the street and burn their wealth. Unlike most other professions, the process of execution (share transaction) is the easiest one. Anybody who has money and trading account can execute the transactions just "by hearing on the streets". However, the end result (return) is the toughest. Unless the retail investors recognize this hard fact and try becoming professional investors on their own or depend on fund houses, whose integrity is unquestionable, the story of wealth erosion for those investors who "execute trades easily" by "hearing on the streets" would continue for generations.