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The most important thing about investing
"The Most Important Thing in Investing" is a book about investment strategy and management. It mainly discusses the important factors that investors need to pay attention to during the investment process.
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The most important thing about investing
- bacteria
This is a mind map about bacteria, and its main contents include: overview, morphology, types, structure, reproduction, distribution, application, and expansion. The summary is comprehensive and meticulous, suitable as review materials.
- Plant asexual reproduction
This is a mind map about plant asexual reproduction, and its main contents include: concept, spore reproduction, vegetative reproduction, tissue culture, and buds. The summary is comprehensive and meticulous, suitable as review materials.
- Reproductive development of animals
This is a mind map about the reproductive development of animals, and its main contents include: insects, frogs, birds, sexual reproduction, and asexual reproduction. The summary is comprehensive and meticulous, suitable as review materials.
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- Outline
The most important thing about investing
一、 The second level of thinking in learning
First level of thinking: group consensus
The second level of thinking: reverse thinking
When we want to go beyond the average, we need to think higher than others
二、 Understand market effectiveness and limitations
effectiveness
Ineffectiveness
It's not completely effective or ineffective, it's a matter of degree Exploiting inefficiencies is the best way to make great investments Investment opportunities that exist between ineffective and effective
三、 Accurately estimate value
Technical analysis: can only reflect the past and cannot predict the future
Fundamentals: Able to better perceive the future
Value investing: return to value
Growth investing: asset appreciation
You need to have strong professional ability and rich experience, otherwise don’t buy on the left easily
四、 The relationship between price and value
Of all the possible ways to make money from investments, buying at low prices is the most reliable.
Investment profit paths: asset appreciation, leverage, selling above the asset value, buying below the asset value
Do value in the early stages of the bull market, and speculate in the middle and late stages of the bull market. Enjoying the bubble is dangerous but still attractive,
五、 Understand the risks
Risk is an event that is more likely than certain to occur
The risk of loss is mainly due to excessive prices. A stock with poor fundamentals may not lose money if its stock price is cheap enough. For good stocks, being too optimistic may lead to losses.
六、 Identify risks
Risks cannot be eliminated, they can only be transferred and dispersed. Anyone who tells you a risk-free and high-yield way to make money is either a liar or you are a fool
Many people overestimate their ability to identify risks and underestimate the conditions needed to avoid risks.
Widespread negative opinion minimizes risk because all optimism is removed from the price
七、 control risk
Risks exist in bull markets, but they cannot be observed or verified, so risk control at that time is not recognized. Only well-trained and experienced people can examine risks during boom times.
The difference between controlling risk and avoiding risk. Controlling risk is the best way to avoid losses, and risk avoidance is likely to be avoided along with gains. If you don’t want to lose anything, the best way is to go short, then you won’t make any gains.
八、 Pay attention to the cycle
Rule 1: Most things are cyclical
Rule 2: Some of the greatest profit and loss opportunities come when others forget Rule 1
九、 pendulum consciousness
Examples: excitement and frustration, optimism and pessimism, greed and fear, doubt and gullibility, risk aversion and risk tolerance, etc.
Three stages of bull market
A few people with vision begin to believe that everything will be better
Most investors realize that progress is indeed happening
Everyone asserts that everything will always be better
Three stages of bear market
A few investors who are good at thinking realize that although the situation is great, it cannot always be a bed of roses.
Most investors are aware of the deterioration of the situation
Everyone believes the situation is worse
The reincarnation of yin and yang, the principle that everything must be reversed when it reaches its extreme, misfortune lies on the back of blessing, and blessing lies on the back of misfortune. The key is to grasp the degree and accurately determine what stage you are at.
十、 Resist negative influences
why error occurs
The emotion that erodes an investor's success is the desire for money, especially when that desire turns into greed
fear
The tendency to abandon logic, history, and norms
The erroneous mentality among investors is the tendency to follow the herd rather than stick to their own opinions.
envy
conceited
compromise
Characteristics that appear later
Investors will do their best to hold on to their beliefs, and when the economic and psychological pressure becomes overwhelming, they will give up and follow suit.
How to do it
Have a firm sense of intrinsic value
When price diverges from value, keep doing what you have to do
Know enough about past cycles
Thorough understanding of the potential impact of markets on the investment process in extreme markets
When things seem "too good to be true," they usually aren't
When the market's miscalculation becomes more and more profound, and you appear to be wrong, be willing to bear the consequences.
Support each other with like-minded friends or colleagues
十一、 contrarian investing
There are two basic elements of a great investor:
Seeing qualities that are not seen or valued (and not reflected in the price)
Translate this quality into reality (or at least be accepted by the market).
Most investors are trend followers
What we need to do is to grasp the changing direction of the public's thinking, so as to judge our own positive direction.
Only when most people cannot see the value of the investment will the price fall below the value?
十二、 looking for bargains
Risk comes from high prices, so cheap goods are the best opportunity
How to Find Undervalued Properties
Little known or half-understood
On the surface, there seems to be something wrong with the fundamentals
Controversial, inappropriate or alarming
Considered inappropriate for a “regular” investment portfolio
unappreciated, unpopular and unsought
Poor revenue track record
Those who have suffered losses recently and have no capital gains
十三、 Wait patiently for opportunities
The bull-bear cycle is very long and requires enough patience
Great opportunities to buy occur when asset holders are forced to sell. Such people abound in the economic crisis.
The key in a crisis is to stay away from forced selling forces and position yourself as a seller. To meet this standard, investors need to do the following:
Believe in value, use little or no leverage, have long-term capital and tenacious willpower. Backed by a contrarian investing attitude and a strong balance sheet, patiently waiting for opportunities can reap astonishing gains in the face of disaster.
十四、 Recognize the limitations of forecasting
There are two types of prophets: those who are ignorant, and those who are unaware of their ignorance.
Predictive Invalidity
1. Are the predictions generally accurate? no
2. Are predictions valuable? Forecasts that accurately foresee market changes are most useful
3. What does the prediction come from? Predictions are mostly derived from inferences
4. Was the prediction accurate? definitely
5. What matters is being accurate over the long term.
十五、 Understand yourself correctly
things happening around you
When others are blindly confident and actively buy, be extra careful
Should be more aggressive when others are overwhelmed or panicking about new sell-offs
market thermometer
十六、 Pay attention to luck
What is a good decision? A good decision should be made by a logical, intelligent, and insightful person when the conditions arise and before the results occur. In the long run, good decisions will definitely bring investment returns. However, in the short term, when good decisions fail to bring investment returns, we must be patient.
Because most outcomes go against us, we must invest defensively. To improve our chances of success, we must act contrary to the crowd during market extremes: be aggressive when the market is down, and be cautious when the market is booming.
十七、 Diversified investment
Offensive investing
Centralization and Leverage
defensive investing
Eliminate investment failure factors
Avoid recessions and avoid exposure to collapse crises
The key is the balance between offense and defense
十八、 avoid mistakes
The causes of errors are mainly analytical/thinking or psychological/emotional.
Analytical errors are mainly due to "imagination inability", which is used to express the inability to imagine all possible outcomes and the inability to fully understand the results of extreme events.
Psychological/emotional factors that lead to errors: greed, fear, etc.
Bubbles and crashes: When psychological factors lead some investors to hold extreme views that are not offset by the views of others, they can lead to prices that are too high or too low
An overheated market means investors are eager to invest their funds in the market in exchange for higher returns.
十九、 The meaning of added value
How to achieve added value
"Beta" coefficient, a measure of a portfolio's sensitivity to market movements
"Alpha" coefficient, an individual's investment technique, or profitability independent of market movements
二十、 most important thing
Must have deep insight into value
Build your own values based on facts and analysis
Objective merit is not an investment opportunity. Buy well, not buy well
Limit Risk: Increase profit potential, buy below value. Buying growth stocks or hot momentum markets does no such thing
Price and value are influenced by psychology and technology, both of which may dominate in the short term
Economic and market cycles fluctuate up and down, and most people believe that they will continue in this direction forever. This kind of thinking is dangerous.
Group psychology shows pendulum-like fluctuations
Never underestimate the power of psychological shadow
Most trends eventually go too far
Determining the position of the cycle: when other investors are carefree, we should be cautious; when other investors are panicked, we should be more active
There is no difference between being too far ahead and making a mistake, and pricing too low does not mean it will rise quickly.
Understanding risks is as important as reaping rewards
Avoid losing investments and winning ones will follow
A margin of error can give you staying power and help you survive market downturns