There is an uncomfortable truth about the Dhaka Stock Exchange: the majority of retail investors lose money. Not because the market is rigged against them, not because profitable investing is impossible, but because they repeat the same avoidable mistakes over and over.
Understanding these patterns is the first step toward not becoming part of the statistic.
Mistake 1: Chasing Tips Instead of Doing Research
Walk into any brokerage house floor in Motijheel and you will hear it — whispered stock names, confident predictions, “guaranteed” returns. The tip culture in Bangladesh’s stock market is deeply entrenched.
Here is what typically happens: someone hears from a “reliable source” that XYZ Company is about to announce a big dividend or secure a government contract. They buy at ৳120 without checking the company’s financials. The stock runs up to ৳140, they feel like geniuses. Then it falls to ৳90 and they are stuck holding a stock they know nothing about.
The people who profit from tips are usually the ones who bought before the tip started circulating. By the time information reaches the average retail investor, it has already been priced in — or worse, it was fabricated to begin with.
The fix: Before buying any stock, spend at least 30 minutes reviewing its P/E ratio, EPS trend, debt levels, and recent quarterly results. If you cannot explain why a company is a good investment in two sentences, you do not understand it well enough to buy it.
Mistake 2: Herd Mentality
When DSEX is rising and everyone around you is making money, it feels irresponsible not to participate. This is herd mentality, and it has destroyed more portfolios in Bangladesh than any market crash.
During the 2010 stock market bubble, thousands of first-time investors poured their savings into the market simply because their neighbors and colleagues were profiting. Rickshaw pullers were buying shares. Teachers were mortgaging homes. The DSEX (then DGEN) had risen from around 3,000 to over 8,900 in roughly a year. When the bubble burst in December 2010, the index lost over 50% of its value. Billions of taka in household savings evaporated.
The lesson is not that the market is dangerous. The lesson is that buying something only because others are buying it is not investing — it is speculation driven by social pressure.
The fix: Have a written investment thesis for every stock you own. If your only reason for buying is “everyone else is buying,” that is a red flag.
Mistake 3: No Exit Strategy
Many DSE investors put serious thought into which stock to buy but zero thought into when to sell. They have no concept of a mental stop-loss — a predetermined price at which they will exit a losing position.
Imagine you buy a cement company at ৳250 per share, investing ৳1,00,000. The stock drops to ৳200, then ৳175, then ৳150. At each stage, you tell yourself it will recover. By ৳120, you have lost over ৳50,000 and you are holding out of pure hope rather than analysis.
A disciplined investor might have decided beforehand: “If this stock drops 15% from my buy price without a fundamental reason, I will exit and reassess.” That would have limited the loss to ৳15,000 instead of ৳50,000+.
The fix: Before every purchase, decide your exit conditions — both for profit-taking and for cutting losses. Write them down.
Mistake 4: Overleveraging
Some investors borrow money to invest in the stock market, either through formal margin accounts or informal loans. This amplifies both gains and losses — but in practice, it mostly amplifies losses because it forces bad decisions.
When you invest borrowed money, a 15% drop does not just reduce your portfolio — it threatens your ability to repay the loan. This pressure leads to panic selling at the worst possible time.
Consider this scenario: you have ৳3,00,000 of your own money and borrow ৳2,00,000 more to invest ৳5,00,000 total. If the market drops 20%, your portfolio is worth ৳4,00,000. After repaying the ৳2,00,000 loan, you are left with ৳2,00,000 — a 33% loss on your own capital from a 20% market decline. And that is before interest costs.
The fix: Only invest money you can afford to lose entirely. If a 30% portfolio decline would cause you genuine financial hardship, you are investing too much.
Mistake 5: Buying at All-Time Highs Without Context
A stock hitting an all-time high is not automatically a good sign. Sometimes it reflects genuine business growth. Other times it reflects irrational exuberance, manipulation, or momentum trading that is about to reverse.
The danger is buying a stock at ৳500 that was ৳200 six months ago, without understanding why it tripled. If the answer is “quarterly earnings doubled and the company expanded into a new market,” the high price might be justified. If the answer is “it was trending on Facebook stock groups,” it almost certainly is not.
The fix: Always ask why a stock is at its current price. Look at the price-to-earnings ratio relative to its historical average and sector peers.
Mistake 6: Ignoring Costs
Every trade on the DSE carries costs: brokerage commission, CDBL fees, BSEC fees, and taxes. For frequent traders, these costs compound quickly.
If you are trading ৳50,000 per transaction with a 0.30% commission each way, that is ৳300 per round trip (buy + sell). Ten round trips per month means ৳3,000 in commissions alone — ৳36,000 per year. On a ৳5,00,000 portfolio, that is over 7% of your capital consumed by fees before you make a single taka of profit.
The fix: Trade less. Buy quality stocks and hold them. Let compounding work instead of trying to time every move.
The Pattern Behind All These Mistakes
Every mistake listed above has the same root cause: acting on emotion rather than analysis. Fear, greed, social pressure, impatience, and wishful thinking are the real reasons most DSE investors lose money.
The market itself is not the enemy. The DSE has created genuine wealth for disciplined investors who bought good companies at reasonable prices and held them through volatility. The problem is that this approach — patient, boring, research-driven — is far less exciting than chasing the next big tip.
Building Better Habits
Protecting yourself from these mistakes does not require advanced financial knowledge. It requires:
- A written investment plan with clear buy and sell criteria
- Position limits so no single stock can devastate your portfolio
- Regular review of your holdings based on fundamentals, not price movements
- Patience to wait for the right opportunities instead of chasing every trend
- Honest self-assessment — tracking your actual returns, including losses, not just your wins
Tools like FinTrail can help with the tracking part — showing your real P&L across all positions so you cannot hide from your results. But the discipline has to come from you.
Think About This
- How many of your past stock purchases were based on tips versus your own research? What were the results of each?
- If your portfolio dropped 25% tomorrow, would it cause you financial stress? If yes, are you overinvested?
- Do you have a written exit strategy for every stock you currently hold?
