Around 1985, I was a salaried man, with neither knowledge nor money to buy stocks.
During that period, in 1987, the stock market crashed.
I recalled advocating strongly to my colleagues that buying SIA shares, if I recall correctly at about $8.00, would definitely be profitable when the market recovered.
I believed Singapore cannot afford to let SIA failed because it is the largest employer in our country at that time. I was right but as I learn now, “value stocks” would usually return to its value after rationality returned to the market.
杞人忧天
qǐ rén -yōu tiān
[like the man of Qi who was haunted by the fear that the sky might fall]
传说杞国有个人怕天塌下来,愁得寝食不安
with unwarranted anxiety
比喻不必要的忧虑
Lynch noted that investors made a killing in the 1950s despite the very new threat of nuclear war. There are plenty of fears to choose from right now, but we've survived a Great Depression, two world wars, an oil crisis, and double-digit inflation.
Always remember, if our worst fears come true, there'll be a heck of a lot more to worry about than some stock market losses.
Lynch's parting shot is that investing is more about stomach than brains.
Chokkavelu, A. (18 Feb 2010). Your best shot at a 10 Bagger. Fool.com , http://www.fool.com/investing/small-cap/2010/02/18/your-best-shot-at-a-10-bagger.aspx?source=ihpsitota0000001&lidx=4.
This became the key principle or philosophy guiding my investment in stocks more than a decade later.
The long term is inevitable. It is regression to the mean all over again.
Ellis, D. C. (2010). Winning The Loser's Game. McGraw Hill. Pg 30
船到桥门自会直
chuán dào qiáo mén zì huì zhí
[There is always a way Don't cross the bridge until you come to it; in the end things will mend]
犹言车到山前必有路。比喻问题自会得到解决
When I venture into investment 15 years later, this belief enables me to hold on to my investment resolutely during the stock crash in 2000/2003. It is a simple principle. It may not be exactly true in its assertions. However it affirms the importance of investment in selected good value, solid and reliable companies at attractive price. It strengthened me mentally in the spiraling downtrend of the prices of my investment.
Very simply, this means that individuals must understand that there is a psychological mindset that the successful investor tends to have. More specifically, the successful investor will focus on probabilities and economic issues and let decisions be ruled by rational, as opposed to emotional, thinking.
Cutis, G. (2008). Think Like Warren Buffet. Investopedia , http://www.investopedia.com/articles/stocks/08/Buffett-style.asp.
However it is simple said, but not easy to change this mindset.
Admit it, investors are sheep, fools, predictably stupid losers
So what's the only thing you need to know about behavioral economics? Begin with the fact that you are predictably irrational. Your brain is not only irrational, your behavior is easily predicted. You can be manipulated without ever knowing it. Wall Street knows your brain is your worst enemy, that 88% of your behavior is driven by the subconscious, biases you cannot change.
Farrell, P. B. (3 Jun 2010). American Investors Predictably Stupid Losers. MarketWatch ,
http://www.marketwatch.com/story/american-investors-predictably-stupid-losers-2010-06-01?pagenumber=1.
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