Investment 2026: Why most investors fail in volatile markets — expert flags the missing exit rule

Equity markets opened 2026 on a shaky note, with benchmark indices Sensex and Nifty witnessing sharp intraday swings amid persistent foreign fund outflows and global tariff-related uncertainties. On Wednesday (January 14), the BSE Sensex slipped 53.88 points to 83,573.11 in early trade, while the NSE Nifty fell 16.55 points to 25,719.25. Exchange data showed foreign institutional investors selling equities worth Rs 1,499.81 crore a day earlier, even as domestic institutions provided partial support with net purchases of Rs 1,181.78 crore.

Such volatile conditions often expose a hard truth about retail investing: most investors do not fail because they pick the wrong stocks — they fail because they do not know when to exit.

That, according to Alok Jain, Founder of Weekend Investing, is the single biggest blind spot in Indian equity investing. Drawing on three decades in the markets, including years running a brokerage business, Jain said nearly 95 per cent of investors he encountered did not make money because of skill. “Most gains came from luck — inheriting shares, holding forgotten paper certificates, or simply sitting on stocks that happened to rise. Very few investors actually mastered the discipline of entering, holding and exiting at the right time,” he said.

Jain argued that the industry’s obsession with stock picking has created a dangerous imbalance. “Every investor asks which stock to buy. Hardly anyone asks which stock to sell,” he said. Business channels, research reports and market commentary overwhelmingly focus on new ideas, while past investments quietly fade into portfolios, often without a clear review of whether they should still be held.

This omission, he believes, is why returns are frequently lost not at entry, but at exit. “Entry decides participation. Exit decides performance,” Jain said. A stock may rise 300 per cent, but if an investor fails to book profits and later watches it fall 80 per cent, the entire journey becomes meaningless. “Countless investors have seen huge paper gains vanish simply because they had no exit rule.”

According to Jain, every stock passes through only three broad phases: uptrend, downtrend and range-bound movement. Yet investors are constantly told that success depends on predicting which stock will do what. That mindset itself is flawed, he said. Instead of prediction, he advocates a rules-based approach rooted in momentum. “You do not need to forecast. You follow price. When a stock rises, you hold. When it weakens, you sell. Over time, probabilities work in your favour,” he said.

The real enemy of performance, Jain warned, is emotional attachment. Investors often deepen their conviction after buying, studying balance sheets, testing products, defending the company, until the stock becomes personal. But companies, unlike people, can lose relevance overnight due to technology shifts, governance failures or competition. “Longevity in business is shrinking. You cannot marry a stock anymore,” he said.

This is why Jain insists that exit planning must begin even before entry. A disciplined investor, he says, builds scenarios in advance: what to do if the stock rises sharply, stagnates, or falls decisively. “You need a military-style plan — cold, unemotional and rule-based. Otherwise, decisions made after a 50 per cent fall are no longer investment decisions; they are fear trades.”

He cites multiple market examples where investors either exited too late and lost gains, or exited too early after repeated false starts, only to miss massive rallies later. The lesson, he says, is not about timing perfection, but about having a framework that removes emotion from decision-making.

“Missing some upside is a cost. Not exiting on time is a risk,” Jain said. “Most investors don’t lose money by buying wrong. They lose money by staying on too long.” In volatile markets like those shaping up in 2026, that distinction could define the difference between compounding wealth and compounding regret.