Chapter 57 [Investment Philosophy] - Successful Investors

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[James Origin and Today] Chapter 57 - [Investment Philosophy] - Successful Investors (08/17/2023)

To become a successful investor, you must understand economics, theory, history and psychology. Among them, only [psychology] is the most difficult and the most critical part to success.

The most critical reason why psychology has become an investment is that the evolutionary process of our human hunting is animal behavior that focuses on short-term risks (worrying about tigers and lions; rather than focusing on long-term returns. Human genes that do not worry about short-term risks cannot survive), and investment is a market that completely opposes the psychology of human survival. [Investment Psychology] cannot be completely learned from books. It can only be learned from the actual market conditions against human nature. Other knowledge books such as global finance, financial history, value theory, etc. are all available.

There are several key steps to building a successful investing mindset:

1. Stay away from the market: What investors should pay most attention to and distinguish are the economic boom and bust, the formation and bursting of bubbles, the bottom of market disappointment (darkness before dawn), and the least important thing is the rise and fall of the market. So stay away from the market and ignore the short-term rise and fall of the market. The market will always rise. As long as you accept this fact in your heart, you will only buy the index and not sell it, and your investment will be successful.

2. Accept losses: When we have confidence, believe in mankind, believe in the United States, and believe in technology, the American Index Fund will rise over time. Short-term losses are all worth it. Only by enduring short-term losses when the market falls, or even better if you can take advantage of dips, can you reap the big profits when the market rises.

3. Be responsible for yourself: Investors must be responsible for all their investments. The market will never cause losses, only the investors themselves cause losses. Therefore, you must be responsible for all losses. When you lose money, don't blame the market, and don't think that by studying the market more and understanding the market better, you can increase your investment winning rate. You must be responsible for your own investment. When you lose money, you should self-examine your own mistakes (common investment mistakes are: choosing the wrong target to chase the high and sell the low; to avoid such mistakes is to buy the index, hold it for a long time, and never sell it). People who work harder to study the market instead create themselves as "trading machines". Frequent trading is an irresponsible attitude, and it is the shortest way for investors to harm themselves and destroy themselves.

4. Create confidence: Investors stay away from the market, accept the market, are willing to bear losses and risks, take responsibility for their own operations, and carefully review the psychological barriers and pathologies of their own operations before making self-adjustments. They only use the simplest investment theory and common sense to look at the market, and firmly believe that investing in indexes will make money in the long run.