[Summary]
The true nature of deflation is a theme that considers the impact that falling prices and lack of demand have on the economy.
To understand the true nature of deflation, it becomes easier to see the difference between situations in which it can be used and situations in which it is difficult to use.
In actual investment, the starting point is to look at corporate profits and wages under low growth conditions. However, it is important to note that it is easy to think that cheaper prices are always a good thing.
In this article, we will explain the true nature of deflation, not as "knowledge", but as steps to check before buying or selling. Don't rush to conclusions, read according to your financial amount and time horizon.
First, let's distinguish by the true nature of deflation.
When looking at the true nature of deflation, first determine what you want to judge. The information you need will change depending on whether you want to know the meaning, confirm before buying or selling, or review your current holdings.
Especially for beginners in investing, the easier the words are, the more they tend to take them as a conclusion. The true nature of deflation is not the only factor in determining a decision. If you want to check it, it is more realistic to look at it in conjunction with fund management, holding period, and opposing materials.
Thinking about the true nature of deflation using an example
If we look at the true nature of deflation as an example, we first need to make a narrow premise. It is important not to mix up whether you are talking about the market as a whole, individual stocks, NISA or long-term funds.
Checking the following points will make things a lot easier.
| Axis to check | Looking at deflation for what it really is |
|---|---|
| purpose | What do you use to judge? |
| Time axis | Which is closer to short-term trading, long-term holding, or NISA? |
| basis | Which one is more important: price, business performance, interest rates, exchange rates, or psychology? |
| risk | When things go the other way, where should you look again? |
| action | Will it lead to buying, selling, or doing nothing? |
Points that can easily cause trouble in making decisions
It is not only when we lack knowledge that we stumble over the true nature of deflation. In fact, there are situations where we interpret something conveniently because we know a little bit about it.
- Focus on one scene where the true nature of deflation works well
- Even if the price movements are similar, if the background is different, they are treated as different things.
- View not only successes but also failures using the same criteria.
- Check if you can reproduce it with your own amount of funds
What is important here is not to settle on a single correct answer based solely on the true nature of deflation. In investment, the meaning of the same material changes depending on the market, holding period, and amount of funds. When in doubt, prioritize confirmation over conclusion.
Checklist before buying and selling
Before making an actual judgment on the true nature of deflation, please check at least these five points.
- Can you explain in one sentence the purpose of looking at the true nature of deflation?
- Have you confirmed one or more countermeasures or failure conditions?
- Are you investing your living funds or money that will be used soon?
- Have you decided in advance the criteria for cutting losses, taking profits, and continuing to hold stocks?
- Are you making judgments based only on social media or short headlines?
Checklists are simple, but they prevent you from adding reasons after making a decision. The purpose of confirming the true nature of deflation is not to act faster, but to reduce unnecessary judgment errors.
Summary
The true nature of deflation is a material for organizing investment decisions. Even if you read it as an example, your judgment will be inaccurate if you treat it as a standalone buy/sell signal.
The points to keep in mind are as follows.
- Decide first the purpose of seeing the true nature of deflation.
- Do not mix time axis and amount of funds
- Check not only good materials but also negative materials
- When using NISA and long-term funds, consider how to handle losses
- When in doubt, reduce your position or postpone it.
The more knowledge you have, the safer it seems, but in the market it can become dangerous if you use it incorrectly. The true nature of deflation is not a word that forces you to make a hasty decision, but it is realistic to treat it as a tool to pause before buying or selling.