Chapter 43 [It Is Not That We Do Not Trade; We Decide Not to Trade!]

Source:https://www.facebook.com/100063294665283/posts/597204895732661/

[James Origins and Today] Chapter 43 - It Is Not That We Do Not Trade; We Decide Not to Trade! (06/15/2023)

Many friends ask, James! You used to trade, and you traded quite well. You were able to avoid the bubbles in 2000 and 2008. Why do you not avoid this one, and instead choose to face the market decline? Is this really a good approach?

In fact, every strategy has strengths and weaknesses. When we want to help the general public invest successfully, we can only use a method that ordinary people can actually do: follow it, endure market volatility, and become wealthy.

Of course, even with buy and hold, never selling no matter what, some people still cannot endure it, or they find it hard to bear the huge pressure of market declines. In investing, this is already a relatively simple and reliable way to succeed. But every strategy and method has its limits. Know its strengths, understand its weaknesses, and choose after balancing the pros and cons.

There really is no investment method that can let everyone succeed with no pain at all, and there cannot be a strategy that is never hit by the market. Long-term index fund investing offers a road with a high probability of success for most people: "very simple, but not easy."

In the past, our trading was very successful and avoided two bubbles, but not every follower was lucky enough to earn the same returns.

"When someone leads you in and out, followers usually fail, and their losses are heavy." Because followers are not robots. Our suggestions require followers to think, endure mental struggle, and deal with interference from outside information, so their decisions are delayed for a long time. (Trading usually goes against human nature. Asking followers to act immediately on a suggestion is hard!) In the end, when we buy in one lump sum and the market rises to a high point, investors slowly begin to think buying is right. By the time investors bravely buy, we are already about to sell. With the same sell recommendation, by the time followers decide to act, they may already be selling at the market floor. This is why followers can never succeed.

To give the simplest example, at the end of last year we suggested that investors in Taiwan sell the four major funds, but some people still did not do it, or could not do it. At the beginning of the year, we suggested that investors give up individual stocks and move entirely into index funds (whether right or wrong, at least it could avoid the slaughter in individual stocks). Very few people could do that immediately.

So even when all trading actions are correct, if 1% of people can follow each one, that is already very difficult. (Based on my feeling over the past few decades, even among friends who have followed for a long time, fewer than 1% truly and fully execute each suggestion. It is even harder now for many friends who do not know me.) If there are two trades, the people who can follow both completely are only 0.01%. Over the long run, the success rate becomes zero. Even correct trading cannot really help everyone.

So it is not that we do not trade; it is that we cannot trade. Almost no one can follow trading and succeed, so why do meaningless trading? Trading goes against human nature. You have to be a robot to succeed. If you are human, it is very hard to earn long-term profits through trading.

Our investment strategy of buying and holding long term also faces great difficulty. But as long as everyone does not trade (just accomplish this one thing), you can pass through spring, summer, autumn, and winter, and move through bull and bear markets. Of course, getting through is not easy. But as long as you recognize one thing, that the market rises over the long term, and invest in indexes, you can invest successfully. Compared with other strategies, this strategy has a relatively higher success rate. Of course, some people still cannot do it and cannot withstand the pressure of market declines. Then they truly are not suited to investing, or at least not suited to our long-term holding strategy. (Other strategies are even harder.)

Finally, the most important reason for not trading is that trading has never brought more profit. Trading is inherently a zero-sum game, with an expected value of zero. If you can earn a little money, that is already impressive. But the people who make big money usually make big money by staying in the market. The way to make big money in investing is to learn not to trade!