12.2022 Life Guide
Investment "break away"
Far Eastern International Bank / Lian Qichao
On the way of investment, the general public always pursues how to make money, from fundamental analysis to various technical analysis tools, and then looks for inspiration from financial media, or even join investment advisory members to seek the secret of clear brand or steady profit. But in real life, there are few people who can really make long-term investment profits. Maybe it is because we have done too much to explore the reason.
Yingko Yamashita, a famous Japanese writer, has become popular all over the world with his book Breaking Away, advocating to reorganize life through "breaking what is never needed, giving up superfluous things, and breaking away from the attachment to objects"; This concept can also be used in investment. Next, let's reorganize the investment together!
1. Don't blindly pursue buying low and selling high
There is a saying on Wall Street: "The market is always right.". However, ordinary investors tend to be overconfident and mistakenly believe that they can defeat the market. What's more, they regard themselves as investment experts, just like investment advisers on TV, who always buy at the lowest point and sell at the highest point. In fact, in the field of investment, there are only winners, no experts, and investors who can defeat the market for a long time are a drop in the ocean.
The strategies of "buying low and selling high" or "selling high and covering low" are collectively referred to as "timing trading". At first glance, it sounds perfect, but the reality is always cruel. According to research data, in the past 20 years (from January 3, 2000 to December 31, 2019), if an investor invests in USD 10,000 to S&P 500 index, he or she will continue to hold it no matter what happens, his or her annual return will be 6.06%, but if he or she misses the top 10 days of single day rise, his or her return will immediately fall to only 2.44%. If he or she misses the top 30 days of single day rise, The annual remuneration will be -1.95%. Looking at the research data, do you think it is really easy to "buy low and sell high"?
2. Don't try to predict the market trend
Investors often like to predict the market trend. However, due to the complexity of the factors affecting the stock price trend and the influence of human nature, it is almost impossible to accurately predict the stock market. According to Bloomberg research data, analysts predicted that the S&P 500 index would rise by 8.8% in early 1999, and actually rose by 19.5% that year; At the beginning of 2018, analysts predicted that the S&P 500 index would rise by 10.3%, but it fell by 6.2% in the end... To sum up, the predictions made by analysts in the past 20 years were wrong for up to 13 years. Even professional stock market analysts are difficult to accurately predict the trend of stock prices. If we, as the general public, have successful experience in forecasting, it is usually because of chance or luck. We should not overestimate our forecasting ability.
3. Don't review investment performance too frequently
The world-renowned successful investors are often practitioners of long-term investment strategies. Warren Buffett, the most familiar stock god, can be said to be the most famous long-term investment master. The stock price of Berkshire Hathaway, a subsidiary of Berkshire Hathaway, reached a historical high of USD 544389 per share on March 29, 2022 from USD 19000 per share when it was listed on October 3, 1994. In the past 28 years, the share price has grown 28.65 times, with an average annual increase of more than 100%. Even if the company's stock price has such a bright performance for a long time, however, when the overall environment is not good, the financial report of Berkshire Hathaway will still produce unrealized losses on the account, but it will not affect its long-term investment performance and stock price performance. The key is that Buffett does not care about the short-term fluctuations of stock prices. If the fundamentals of the enterprises he pays attention to remain unchanged, the decline of stock prices is a good opportunity for layout.
Of course, not everyone can become Buffett. To enjoy the sweet fruits of long-term investment, the key is to be able to withstand short-term investment book fluctuations, and not too frequently check the investment profit and loss of the account, because the more frequently you check, the more easily your mood is affected, and then make wrong decisions because of impulse. In 2022, when the market fluctuates sharply, if investors review the performance once a quarter, they will only see three losses; However, if you review it once a month, you will see ten losses. If you review it once a day, you will see nearly 300 losses. Because human nature is extremely averse to money loss, when people frequently feel the loss, they must want to do something to reduce their psychological anxiety. At this time, they are easy to sell stocks at a relatively low point because of impulse. Because the long-term trend of the stock market is upward, in this way, unnecessary losses will be formed; On the contrary, if the investment performance is frequently reviewed at the low point when the COVID-19 broke out in March 2020 and during most of the stock market period by the end of 2021, it is very likely that because of the impulse to be safe, it will only earn 10-20% and then exit the market, thus missing the big market that doubled the growth of the entire wave.
4. Don't fall in love with the investment target
In the world of investment, it is reasonable to be familiar with the subject matter. However, in practice, investors must not have feelings with the subject matter of investment. What does it mean to have feelings? In short, many people are prone to the emotional illusion of "this stock is very suitable for me" and "this fund is very suitable for me" because of the smooth investment in a specific subject matter. They do not know that the business operation of the enterprise changes at any time, and the prospect of the industry will not always be bright. Once the trend changes, the stock price may fall down and even become wallpaper. If you stick to the investment subject matter until death, It's me who lost so much!
Take the early Taiwan stock market as an example. In 1978, Cathay Life Insurance set a record high price of NTD 1975. In terms of the price level at that time, buying a share of Cathay Life Insurance was enough to buy a house; However, at this stage, the share price of Cathay Pacific Gold is less than NTD 40, about 1/50 at that time. Taking the American "Dow Jones Global Index (DJGI)", which has been established for more than 100 years, as an example, after experiencing the Great Depression, two world wars, the oil crisis and several financial tsunamis, the 12 companies that were established in that year, even the longest standing General Electric, were replaced in June 2018. In other words, Today's "Dow Jones Global Index (DJGI.
The four habits that investors should give up are not absolute, because there must be experts in "timing trading", band operators who are good at "buying low and selling high", and experts in short-term trading. However, such winners are rare. As an ordinary investor, the most important and priority task is to understand your investment personality and find out the appropriate investment style and way. Are you ready to "break up" your investment?
Yingko Yamashita, a famous Japanese writer, has become popular all over the world with his book Breaking Away, advocating to reorganize life through "breaking what is never needed, giving up superfluous things, and breaking away from the attachment to objects"; This concept can also be used in investment. Next, let's reorganize the investment together!
1. Don't blindly pursue buying low and selling high
There is a saying on Wall Street: "The market is always right.". However, ordinary investors tend to be overconfident and mistakenly believe that they can defeat the market. What's more, they regard themselves as investment experts, just like investment advisers on TV, who always buy at the lowest point and sell at the highest point. In fact, in the field of investment, there are only winners, no experts, and investors who can defeat the market for a long time are a drop in the ocean.
The strategies of "buying low and selling high" or "selling high and covering low" are collectively referred to as "timing trading". At first glance, it sounds perfect, but the reality is always cruel. According to research data, in the past 20 years (from January 3, 2000 to December 31, 2019), if an investor invests in USD 10,000 to S&P 500 index, he or she will continue to hold it no matter what happens, his or her annual return will be 6.06%, but if he or she misses the top 10 days of single day rise, his or her return will immediately fall to only 2.44%. If he or she misses the top 30 days of single day rise, The annual remuneration will be -1.95%. Looking at the research data, do you think it is really easy to "buy low and sell high"?
2. Don't try to predict the market trend
Investors often like to predict the market trend. However, due to the complexity of the factors affecting the stock price trend and the influence of human nature, it is almost impossible to accurately predict the stock market. According to Bloomberg research data, analysts predicted that the S&P 500 index would rise by 8.8% in early 1999, and actually rose by 19.5% that year; At the beginning of 2018, analysts predicted that the S&P 500 index would rise by 10.3%, but it fell by 6.2% in the end... To sum up, the predictions made by analysts in the past 20 years were wrong for up to 13 years. Even professional stock market analysts are difficult to accurately predict the trend of stock prices. If we, as the general public, have successful experience in forecasting, it is usually because of chance or luck. We should not overestimate our forecasting ability.
3. Don't review investment performance too frequently
The world-renowned successful investors are often practitioners of long-term investment strategies. Warren Buffett, the most familiar stock god, can be said to be the most famous long-term investment master. The stock price of Berkshire Hathaway, a subsidiary of Berkshire Hathaway, reached a historical high of USD 544389 per share on March 29, 2022 from USD 19000 per share when it was listed on October 3, 1994. In the past 28 years, the share price has grown 28.65 times, with an average annual increase of more than 100%. Even if the company's stock price has such a bright performance for a long time, however, when the overall environment is not good, the financial report of Berkshire Hathaway will still produce unrealized losses on the account, but it will not affect its long-term investment performance and stock price performance. The key is that Buffett does not care about the short-term fluctuations of stock prices. If the fundamentals of the enterprises he pays attention to remain unchanged, the decline of stock prices is a good opportunity for layout.
Of course, not everyone can become Buffett. To enjoy the sweet fruits of long-term investment, the key is to be able to withstand short-term investment book fluctuations, and not too frequently check the investment profit and loss of the account, because the more frequently you check, the more easily your mood is affected, and then make wrong decisions because of impulse. In 2022, when the market fluctuates sharply, if investors review the performance once a quarter, they will only see three losses; However, if you review it once a month, you will see ten losses. If you review it once a day, you will see nearly 300 losses. Because human nature is extremely averse to money loss, when people frequently feel the loss, they must want to do something to reduce their psychological anxiety. At this time, they are easy to sell stocks at a relatively low point because of impulse. Because the long-term trend of the stock market is upward, in this way, unnecessary losses will be formed; On the contrary, if the investment performance is frequently reviewed at the low point when the COVID-19 broke out in March 2020 and during most of the stock market period by the end of 2021, it is very likely that because of the impulse to be safe, it will only earn 10-20% and then exit the market, thus missing the big market that doubled the growth of the entire wave.
4. Don't fall in love with the investment target
In the world of investment, it is reasonable to be familiar with the subject matter. However, in practice, investors must not have feelings with the subject matter of investment. What does it mean to have feelings? In short, many people are prone to the emotional illusion of "this stock is very suitable for me" and "this fund is very suitable for me" because of the smooth investment in a specific subject matter. They do not know that the business operation of the enterprise changes at any time, and the prospect of the industry will not always be bright. Once the trend changes, the stock price may fall down and even become wallpaper. If you stick to the investment subject matter until death, It's me who lost so much!
Take the early Taiwan stock market as an example. In 1978, Cathay Life Insurance set a record high price of NTD 1975. In terms of the price level at that time, buying a share of Cathay Life Insurance was enough to buy a house; However, at this stage, the share price of Cathay Pacific Gold is less than NTD 40, about 1/50 at that time. Taking the American "Dow Jones Global Index (DJGI)", which has been established for more than 100 years, as an example, after experiencing the Great Depression, two world wars, the oil crisis and several financial tsunamis, the 12 companies that were established in that year, even the longest standing General Electric, were replaced in June 2018. In other words, Today's "Dow Jones Global Index (DJGI.
The four habits that investors should give up are not absolute, because there must be experts in "timing trading", band operators who are good at "buying low and selling high", and experts in short-term trading. However, such winners are rare. As an ordinary investor, the most important and priority task is to understand your investment personality and find out the appropriate investment style and way. Are you ready to "break up" your investment?
