【summary】
During periods of market collapse, falling prices tend to distort investors' decisions. This time's theme is based on the classic phrase, "Sun and moon never lose their body, the past is restored. The Jianghan and Han never lose their source, the past is restored."
- Stock prices may be temporarily covered by a "cloud", but the main body may not disappear
- Corporate value should be viewed by whether the "body" and "source" (competitive advantage) remain.
- During a market crash, it is the virtue of an investor to maintain discipline, patience, and learning rather than emotions.
Summarize. Ultimately, the question to ask is not ``Have prices fallen?'' but ``Has the essence of the company been lost?''
Stock prices are the “weather” and corporate value is the “sunshine”
When the market crashes, many investors become anxious.
Stock prices fall.
Unrealized gains disappear.
The news is full of pessimism.
At times like this, we become obsessed with the fact that ``prices are falling'' before looking at ``what is happening.''
However, about 2,000 years ago, Ying Ke, a scholar from the Later Han Dynasty of China, left behind an important suggestion that still applies to modern investors.
The sun and moon will never be lost, and the past will be restored.
The Jianghan Dynasty has been revived.
The sun and moon do not lose their bodies.
So even if it is temporarily covered, it will shine again.
The great river never loses its source.
So even if you get stuck, it will start flowing again.
In the world of investment,
Price and value are different
Stock prices are the “weather” and corporate value is the “sunshine”
Markets are always swayed by emotion.
interest rate rise.
Concerns about economic recession.
Geopolitical risk.
Pessimism on social media.
Stock prices fluctuate greatly due to such noise.
But that's just a cloud hiding the sun.
The important thing is that
Has the sun itself disappeared
is.
for example,
- Are sales increasing?
- Is the cash flow healthy?
- Is your competitive advantage maintained?
- Is the management team excellent?
If these are maintained, the main body is not lost.
Even if stock prices fall, corporate value does not disappear.
Good investors look at substance over price.
The most important thing in investment is the “source”
Yingke goes on to say:
The Jianghan Dynasty has been revived.
The great river will flow again because it never loses its source.
Companies also have a "source".
it is,
- Brand power *Technical ability
- Network effect
- Customer base
- Strong financial structure
It is a competitive advantage.
A temporary deterioration in performance is not a problem.
The problem is that
Whether the source of the company itself has been lost
is.
There was a time when Amazon was in the red.
Apple was once driven to the brink of bankruptcy.
But they did not lose their source.
That's why it has grown so much again.
Investor's virtue is tested during a crash
The real crux of this statement is at the end.
The saints never lost their power, and the deceased was restored.
A saint never loses his virtue.
So even if it once falls from grace, it will rise again.
What is "virtue" for investors?
I think there are three things:
1. Discipline
Don't buy or sell based on emotion.
Don't sell out of fear and don't buy out of enthusiasm.
2. Patience
Great companies take time to create value.
Compound interest is powerful over years and decades, not months.
3. Attitude to keep learning
Markets change all the time.
So investors must continue to learn.
When investors lose these, they truly lose.
It's not about losing money in the market.
You lose when you lose your investment principles.
Warren Buffett says the same thing.
Warren Buffett, known as the investment god, essentially has the same idea.
There is a famous saying.
"The stock market is a popularity contest in the short term, but a weighing machine in the long term."
In the short term, emotions drive prices.
However, in the long term, the intrinsic value of a company is evaluated.
So a good investor
Rather than price fluctuations,
Keep looking at the body and source of the company.
Words you want to remember when the market is rough
You don't need an investment philosophy when the market is strong.
Because everyone can benefit.
The true test of philosophy is during a market crash.
The question then is,
“Did the stock price go down?”
Not.
“Have we lost the essence of business?”
is.
If the body is not lost,
If the source is not dry,
May the sun shine again,
As the river flows again,
Corporate value may also recover.
Closing
The sun and moon will never be lost, and the past will be restored.
The Jianghan Dynasty has been revived.
The saints never lost their power, and the deceased was restored.
The most dangerous thing for investors is not a crash.
It's about losing the ability to see the true nature.
Prices vary.
The market also cycles.
But the really good companies and the really good investment principles remain.
That's why the more the market gets rough, the more I want to ask myself this question.
"Has this company lost its roots? Or is it just hidden in the clouds?"
This question should be the strongest compass to support long-term investors.