[Summary]
Lack of knowledge is not the only major cause of investment failure. Being controlled by fear, desire, and impatience.
In this article, we will translate the "strength, honesty, and self-control" necessary for long-term investing into practical investment behavior.
The scariest thing about investing is emotions, not the market.
In investing, ``acting out of fear'' is more dangerous than the crash itself.
For example, the following actions:
- Sell in a hurry when the market declines
- Buy impatiently when the price rises
- The news makes me too anxious
- I look at my account every day and feel happy and sad.
- keep waiting for the safest time
In short, it is a state where you are giving control to your emotions.
Short-term price movements are inevitable in long-term investments. The important thing is not to eliminate price movements, but to have a system that will not be influenced by price movements.
Strength doesn't mean betting big
Strength in investment does not mean reckless concentrated investment.
Strength is the ability to:
| situation | necessary strength |
|---|---|
| At the time of the crash | There is no rush to sell |
| When rising | Don't chase too much |
| Unrealized loss | Check the plan |
| Unrealized profit | Don't be too greedy |
Particularly in long-term investing, persistence is more important than predictive ability.
It is difficult to read the market accurately every time. That's why we minimize the influence of emotions through a system of diversified investment, savings, and asset allocation.
Integrity also relates to investment returns
Investing is a world of money, so it's a field where human weaknesses are easily exposed.
- Show that you can make money in a short period of time
- Sell by stirring up anxiety
- take advantage of someone else's loss
- create FOMO
FOMO is "fear of being left out." It's a psychology where people around you seem to be making money and lose their calm judgment.
Honesty is important if you want to continue investing for the long term. This is because dishonest information and products can easily lead to big losses in the end.
Self-discipline is at the heart of investing.
Self-control is the ability to prioritize rules over emotions.
Investments are tested in the following situations:
- Stick to the upper limit when you want to buy more
- When you want to sell, check the reason
- Don't rush to make additional investments when you want to recover your losses
- Don't take too much risk when you make money
In practice, it is effective to decide on the rules first.
Example:
- save a certain amount every month
- Do not invest life defense funds
- Don't be too biased towards one product
- Review your asset allocation only once a year
The purpose of investing is not to win emotionally. The goal is to create a system that is not easily influenced by emotions.
Summary
- The enemy of investing is not only the market but also your own fears and desires.
- Strength is not recklessness but the ability to continue
- Integrity is a criterion for avoiding dangerous information and products.
- Self-discipline is the foundation of long-term investing
- As for actions, thoroughly diversify, accumulate, and establish rules.