Key points: 1. The common external effect, a typical behavioral deviation when selling assets - selling profits and holding losses, selling profits and holding losses is very likely to cause investors to make little money in a bull market, but lose nothing in a bear market.
in the end.
2. Is it wrong to sell profits and hold losses?
Investors were wrong in both the short and long term.
Investors sell winning assets too early and hold on to losing assets too long.
It is wrong to sell profits and hold losses, and conversely, it is also wrong to sell losses and hold profits.
3. Why don’t people tend to sell at a loss?
1. Prospect Theory 2. How does the disposition effect manifest in investment practice?
How public funds operate 4. How to overcome the disposal effect?
1. You should understand that the disposition effect is a decision error.
The correct approach is to look into the future and not be influenced by reference points such as buying costs.
2. Draw inferences from one example Fund and listed company managers clearly know that investors have this behavioral bias, so they will make decisions that are beneficial to themselves but may be detrimental to investors.
Golden sentence: Selling profits and holding losses is likely to result in investors not making enough money in a bull market, but losing money in a bear market.
Self-summary: 1. Common external effects Question: If you now have a profitable stock and a losing stock in your hands, you are in urgent need of money, and you must liquidate one stock, which one will you liquidate?
Answer: Investors are more inclined to sell profitable stocks than to sell losing stocks.
This is the externalization effect, which refers to the reluctance of investors to sell assets for less than the purchase price.
Investors tend to "sell profits and hold losses."
2. Is it wrong to sell profits and hold losses?
Short-term: 84 trading days after investors' transactions, that is, 4 months later, the profitable stocks sold by investors are still making profits, and the losing stocks held by investors are still losing money.
Midline: 252 trading days after the transaction, that is, one trading year later, the profitable stocks sold by investors are still making profits, and the losing stocks kept by investors are still losing money.
In the long term, 504 trading days after the transaction, that is, after 2 trading years, the profitable stocks sold by investors and the losing stocks left in their hands have all turned into profits, but it is still the profitable stocks sold that make money.
More.
Conclusion: So, investors were sold wrong, both in the short and long term.
? 3. Why don’t people tend to sell at a loss?
1. Review: Prospect Theory People have different risk preferences in gain and loss areas.
When making profits, investors hate risks and want to be safe; when losing money, investors prefer risks and want to give it a try.
2. Example: How does the disposition effect manifest in investment practice?
The way public funds operate is this: investors invest money in the fund, and the fund manager uses the money to invest, and all returns go to the investors. The fund manager charges a fixed management fee based on the size of the fund.
It stands to reason that the manager should make the fund's performance as high as possible, because if the performance is good, rational investors should invest more in the fund. In this way, as the fund size becomes larger, the manager can receive more management fees.
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On the contrary, if the performance is not good, rational investors will withdraw their capital, resulting in a smaller fund size and less management fees for managers.
However, what is very strange is that the actual situation is exactly the opposite - redemption anomaly. When the fund performance improves, that is, when investors are in a profitable state, investors not only fail to add funds as theoretically expected, but instead redeem them.
But when performance was poor, there was no redemption.
In fact, the "redemption anomaly" of the fund is caused by the disposal effect of investors.
In the profit area, investors hate risks and hope to "save money", so they will redeem the fund; in the loss area, investors are risk-loving, so they will not redeem the funds.
Result: Because fund managers will be distracted from investing.
The better it does, the more investors pull out.
Fund managers understand that investors have this irrational psychology and will cater to it.
A common phenomenon is that fund managers do not focus entirely on improving performance and helping users make money, but they are always happy to do things that can effectively increase the size of the fund.
Their approach: Fund splitting. For example, when the net value of a fund is very high, for example, when it reaches 4 yuan, one fund will be split into 4 parts, which will become 1 yuan for each part.