To hone your long-term perspective, you need to know that there are four stages of fixed investment execution:
1. Underestimation stage
2. First harvest
p>3. The second trough
4. Harvest again
These stages experienced, or the existence of these stages, are due to the specific cyclical nature of the investment market.
First of all, the law of cycles is that if you don’t follow a straight line, you must follow a curve, that is, the future is bright, but the road is tortuous. The development of any event will not be a smooth straight line, but an undulating curve. Similarly, the market cycle must be followed by a big fall after a big rise, and a big rise after a big fall. But there is actually a certain causal relationship between rising prices and falling prices. Just like a pendulum, the upward process accumulates downward force and eventually leads to a decline; the downward process accumulates upward force and eventually leads to an increase.
Secondly, the performance of cycle formation will not be the same but similar. As Mark Twain famously said: History does not repeat itself in details, but the process does. Similarly, the direction of market rise and fall will repeat similar historical patterns, but the magnitude of rise and fall will not repeat similar historical patterns. This is the role of randomness proposed by the author of "Antifragility". The general trend and general direction of the cycle can be predicted, but the specific trend and daily rise and fall cannot be predicted.
Furthermore, the market cycle fluctuates around the basic trend line. After the market reaches an extreme, it will always return to the center point or mean reversion. However, the market does not stop after returning to the center point, but continues to rush to the other opposite extreme. Therefore, the four stages we go through in fixed investment are the same as the cycle, either rising to extremes or falling to extremes.
Facing these four stages of fixed investment, we need to adjust ourselves to make different countermeasures for each stage:
At this stage, although we adopt Fixed investment strategy, but the first stage we rushed into the market was because we were attracted by the rising prices in the market. There is no instruction manual for investment, and we cannot fully master it by ourselves in a short period of time. Therefore, the best strategy we can adopt is: blind obedience. Although we have learned to think independently, when it comes to investment, we need to redefine independent thinking: independent thinking based on broad knowledge is truly effective. We need to hone our long-term perspective and form long-term thinking during this stage. For example, the author mentioned as an example that the British old lady Vivian chose the fastest growing tree species. The seeds planted at a certain moment will definitely grow into towering trees after two major cycles.
The specific approach can be:
a. You can think independently, but you can only implement subsequent actions on paper - that is, you can use a Use a special notebook to record your independent thinking, but still remain blindly obedient in action.
b. Carefully observe the decisions and results of others, learn necessary experiences and lessons from others’ mistakes in a timely manner - and record them on paper.
This stage is very short and in fact the most difficult to get through safely. At this stage, you will find that the outside world starts to get noisy, and the external noise and noise directly cause you to hallucinate, causing your IQ to decrease without knowing it. The most hidden stupidity is that on the one hand, you give up the previous long-term investment, on the other hand, you also give up the continued investment for a long time in the future. At this stage, it is easy to produce a psychological phenomenon: the windfall effect, that is, in addition to your own principal, which is hard-earned money, the money you win is all windfall, and you can spend it without any psychological burden. This stage best exercises a person’s ability to do nothing.
The specific approach is very clear:
Do nothing at this stage and only focus on your off-site earning ability. In fact, off-site earning ability is the most reliable way to test whether a person is really making progress, because off-site, you have no trend driver.
After experiencing the previous two cycles from partial decline to rise, from this stage on, we will experience the entire process of decline to rise. This time you will feel the losses magnified N times compared to the first trough stage. If the psychological construction is not sufficient, we will definitely have feelings of regret and regret why we did not stop profit and leave the market at the previous stage. In fact, we have already experienced the waves when entering the river from the creek. We should remind ourselves that there is the sea in front of us. We must continue sailing and rush into the sea of ??stars with stronger wind and current.
The specific approach is that we need to re-establish a world view:
Every end is a new starting point - unless you die, or you actively choose to die.
The law of cycles makes us understand that we have gone through three stages before, and this time we are rushing to a higher peak.
In this stage, what we gain is not only real money, but also our ability to make money off the market has also been improved. More importantly, we have gained what we deserve to do throughout our lives. Things to do: Learn and grow.