Psychology creates 90% of the market situation. Investors often gain more by taking advantage of the stupidity of others than by relying on their own wisdom, and people can also learn from the stupidity of others. -- Andre. Costolani

If a group of people are attacked by collective fantasies, they are driven by an idea or a collectively accepted statement, and they are infected by the actions of others, running in the same direction as lemmings. -- Hanno. Baker.

This blind herd effect is everywhere.Who is the smart guy?Who's the fool? It's hard to tell in a short time. If you don't know a little bit about investment history and investment psychology, then you are destined to be the latter!

(1)

In 2000, everyone in the world was after technology stocks, and every investor seemed to be able to double his earnings easily. At this time, as long as the stocks linked to the Internet and technology are rising crazily, the average price-to-earnings ratio of technology stocks is as high as 180 times. On the other hand, no one is interested in the shares of some traditional, stable and uninnovative companies, even if they make more profits.

On March 10, 2000, the NASDAQ reached an all-time high of 5048, with an average valuation of more than 150 times. The whole world is crazy about the technological revolution brought about by the Internet.

On the other hand, a small number of value investors insist on looking for value companies with slow change, stable performance, reliable assets and relatively cheap valuations, and stay away from the frenzied hype of technology stocks. These "stubborn" who do not participate in technology stocks seem like fools in the crowd.

However, the bubble will burst eventually! Overvaluations that do not match performance cannot last forever. After the Nasdaq reached 5000, the technology bubble burst. Over the next year or so, the Nasdaq index plunged nearly 70% to below 2000 points. The shares of many of these technology companies have even fallen by more than 90%, turning into waste paper almost overnight.

And those who firmly do not participate in the "price bidding stubborn", "fool", but far outperformed the market.

Time is moving forward, and in the early 1970s, managers who invested in the "pretty 50" blue chip stocks made a lot of money. However, in the late 1970s, the same big blue chips were held, but the opposite results were obtained. the expected high returns did not become a reality, and investors were disillusioned with the illusion of "holding forever" and liquidated their positions one after another. The same is true of oil stocks in the 1980s and pharmaceutical stocks in the 1990s.

At the peak of the stock market, people always confidently declare, "this time is different!""it goes up, goes up again, goes up all the time, and ends up plummeting.This phenomenon is repeated all the time.

(2)

Our A-share market is no exception. In the super bull market from 2006 to 2007, stocks that have tripled and quintupled can be found everywhere. But then came the super bear market of 2008, which fell by 70%.

By June 2015, the A-share gem had risen to more than 4000 points, with an average price-to-earnings ratio of more than 80 times. In the previous few years, the "stubborn" who persisted in going against the trend and did not participate in gem hype were treated as "fools in the market". They are despised, ridiculed and satirized, because in terms of short-term performance, they do look like fools who do not make money. (of course I'm one of them.)

But who had the last laugh? Four years have passed since the gem 4000 points, and now the gem index is only 1600 points. The share prices of many former "start-up cattle" have now fallen by only a fraction. And those "fools" who stick to the value investment against the trend once again have the last laugh.

In investment, people will never learn from history, and the newly established "Science and Technology Innovation Board" in the market this year has once again staged greed and madness. The turnover rate is unusually high, being fired wave after wave, all betting on "who is the last big fool to take over"!

Science and Technology Innovation Board can no longer be measured by valuation, because some companies have no profit at all or even continue to lose money. Someone shouted: "Science and Technology Innovation Board can not be valued with the traditional valuation method." "well, I was struck by this point of view. If stock investment is not valued according to assets, profits, cash flow, etc., what else can it be based on?

Some people say, "according to the prospect!" "the outlook is indeed one of the components of the assessment of value, but what do you think is the probability of success without the prospect based on asset profit and cash flow? How certain is it? Among them, there may be enterprises like BAT, but it is estimated that only 1 ‰ of enterprises will succeed. The biggest difference between gambling and investment is that the probability of winning is different! You came to invest in the stock market? Or a gambler? This directly determines your final investment performance! History has proved countless times that "a bird in the hand is worth a hundred birds in the bush". What is true? What is fantasy?

What are we investors investing in? What is the purpose of the investment? Are we investors or gamblers? Is it just for that fantasy about the future? How similar is the current situation? have we learned from the Internet technology stock bubble in 2000 mentioned earlier? I don't think so!

At present, there are many people whose share price of Science and Technology Innovation Board has risen several times, and those who participate in the hype of Kechuang board seem to be "smart people" who have made a lot of money, while those who are far away from the hype of science and technology seem to be "fools". Science and Technology Innovation Board's stir-fry, the result is doomed! Science and Technology Innovation Board's valuation is too high, and there is a serious discrepancy between the value and the price. It is hard to say in the short term, but in the long run, the stock price will definitely collapse! Appropriate participation in playing new stocks is OK, the secondary market speculation or forget it. In the short term, it seems difficult to tell a wise man from a fool.

I hope everyone can learn from history-although I know it's impossible.

In stock investment, I have always believed in:The truth of "Don't go where there are a lot of people"!The more popular the place is, the less cheap it is, the more dangerous it is, and vice versa. So I like to move against the trend!

(III)

When it comes to reverse investment, one person has to mention it. This man is John. Templeton. A legendary fund manager who is good at reverse investment is praised as "the greatest stock picker" by MONEY magazine.

John。 Templeton's most famous passage is:"the bull market is born in pessimism, grows in doubt, matures in optimism, and dies in excitement.The most pessimistic moment is the best time to buy, and the most optimistic moment is the best time to sell.It takes great courage to buy when others are depressed and sell when others are excited and optimistic, but it can bring the greatest profit."

Templeton always finds profitable investment opportunities when the market is depressed and lack of confidence. And keep a clear head when everyone is on a buying spree. Therefore, in decades of investment, John Templeton relied on reverse investment thinking and achieved long-term satisfactory returns.

Most investors are trend followers, or like to conform to trends. Outstanding investors are just the opposite. It was written earlier that good investors need a second layer of thinking, a more complex, insightful and diverse way of thinking that is different from ordinary people. But most people do not have this kind of thinking, so the key to success cannot be group consensus.

As Howard Marks said: "because of the pendulum swing or the cyclical nature of the market, the key to success lies in reverse investment."

The market always fluctuates violently, from a big rise to a big fall, from a big fall to a big rise, alternating between bulls and bears.

Market trends are driven by group behavior. The bull market occurs when more people want to be buyers than sellers, or buyers are more active than sellers. As people change from sellers to buyers, or buyers become more active, the market begins to rise as buyers dominate. On the contrary, the market falls. "

To put it simply, if more people buy, the market will rise. If there are many sellers, the market will fall. This is the most basic principle of rise and fall. So how can it lead to more buyers or more sellers? According to the theory of value investment, if the gap between market value and price is attractive, there will be more buyers. On the contrary, there are many sellers.

However, in fact, the short-term performance of the market is not so effective, and people will not be so rational. Therefore, the reason why there are more buyers or sellers in the short term comes more from the "psychology of investors" or "consensus". There are many factors that affect psychology, such as people's expectations, monetary policy, international situation, economic situation, the performance of listed companies, dividend rates, valuations, and even all kinds of true and false rumors, and so on. Many factors or news will affect the psychology of investors, and this impact will not necessarily affect the value of enterprises, and for most people, the psychological impact is irrational.

So the market either goes up too much or falls too far, and sometimes the irrationality lasts a long time, which creates one investment opportunity after another for a small number of rational investors.But at the same time, it also poses a greater test to the common sense, rationality and patience of investors.

(4)

"the extreme of the market represents an inflection point, which occurs at the peak of a bull or bear market," Howard Marks said. When it comes to the extremes of the market created by the beliefs of the group, most people are wrong. Therefore, the key to successful investment is to go against the trend and not blindly follow the crowd. Those who are aware of the mistakes of others can make a lot of money by investing in the opposite direction. "

In the market, we often see enthusiastic buyers scrambling to buy when the market continues to soar.Panic sellers can't wait to sell when the market continues to plummet.They pay higher prices in an overheated market to get shares. They sold their shares for cash at a very low price in the cold market.

The market situation affects the psychology of most people, and everyone is greedy and crazy in the rising bull market.Everyone fled in fear in the plummeting bear market.The behavior of this group further affects other investors, and eventually the market will rise too much or fall too far.

When the market rises and almost everyone becomes a buyer, the market reverses and falls, because there are no more value for money stocks in the market, no more stupid new entrants who continue to take over, and no new buyers.

When the market falls and almost everyone becomes sellers, the market will reverse and rise, because the market is full of high-quality bargains, there are no new fools who continue to sell regardless of price, and there are no new sellers.

No one can predict when the "inflection point" will occur, and no one can predict when the market will reverse. However, if you enter when the market valuation is high and the market is hot, there is a good chance that you will buy in an uncheap position and will not be too far from the inflection point of the decline. If you leave the market when the market valuation is very low and the market is cold, there is a good chance that you are selling in a very cheap position and closer to the inflection point of the rise.

The turning point in the market generally occurs when fanatical buyers have the upper hand and valuations are pushed to insurmountable heights. The turning point of the market turning bull generally occurs when panicked sellers have the upper hand and valuations are seriously low. "buy low and sell high" is an old saying of investment and business, and everyone knows it. But investors involved in the market cycle often do the opposite.The right thing to do is:Reverse investment, rather than following the trend.

The giant merchants in ancient China have long understood the truth that "if there is water, if the car is dry, the boat will abandon me and take others and give it to me". The same applies to stock investments. Things should be predictable, so is it not the case with investment?

Although we cannot accurately predict when it will "change from drought to flood or from flood to drought", we cannot accurately predict "when the stock market will turn into a bull and when it will turn into a bear".But we know common sense, we know the rules, we know the periodicity, and we know that this time it's no different.Knowing that droughts and floods will not last forever, bull markets and bear markets will not last forever. And in times of drought, boats are cheap. When there is a waterlogging, the car is very cheap. When everyone scrambles to buy in a bull market, stocks are usually very expensive. When everyone scrambles to sell in a bear market, stocks are usually cheap. Knowing this is enough, and it is of great help to us to make investment decisions.

(5)

Don't think that "reverse investment" is very simple!When the price deviates significantly from the value, you first need to have the ability to judge correctly, and you also need to have enough courage to challenge the traditional wisdom, resist the myth that the market is always effective and always correct, and avoid being influenced by the market group thinking.

In addition, even if the valuation is already high and expensive, it does not mean it will fall tomorrow, next week or next month. Even if the valuation is already cheap, it does not mean that it will rise tomorrow, next week or next month. In many cases, the deviation between price and value will last for a very long time, and you must be patient enough to wait. The market may be overvalued or undervalued and may even last for several years.

It is also very difficult to wait after buying or selling. Stocks held are falling every day, or stocks that have just been cleared and sold are rising every day, which can exert great psychological pressure and make you feel frustrated. So much so that he misled himself into thinking that he was making a mistake. In many cases, a long-term right decision looks a lot like a mistake in the short term. Therefore, you must strengthen your faith, trust your judgment, accept temptation and bear loneliness.

"one thing I'm sure of is that when the knife stops falling, the dust has settled and the uncertainty is resolved, the lucrative bargains will cease to exist," Howard Marks said. When buying a stock is safe and exciting again, its price is actually not cheap. As a result, it is often contradictory to be profitable and secure in stock investments.

As contrarian investors, our task is to catch the falling knife as carefully and skillfully as possible, which is why the concept of intrinsic value is so important. If our understanding of value allows us to buy when everyone else is selling, and our view is correct, then this is the way to get the best return with the lowest risk. "

After touching and rolling in the stock market for more than ten years, the deepest feeling is:"the more consistent the market view is, the closer it is to error, and the more dangerous it is!"No exception!Therefore, the most important thing for investment is not to comply with the trend, but to move against the trend!Of course, this is not an easy task, in the short term, do so, you may look like a loner fool! Big fool! Your short-term investment performance will also lag behind those who speculate in hot stocks, but a longer period of time will show real results.

Today, someone asked me, "Hey, did you beat the market today?"

I said: by heaven, I often seem to lag behind the market. But after five years and ten years, my performance has greatly outperformed the market. Isn't it amazing.

The reason is that when the market is rising well and bullish, my position is relatively light, and the increase is naturally not as good as that of others. When the market falls greatly and the bear is depressed, my position is heavier than others, so I naturally fall more than others. But what about the rest of the time? Before the reversal of the market, I will make a reasonable layout, from the cheapest reversal bull when I already have a heavy position or even full position! By the time I reversed the bear from the most expensive, I was already light or even empty. Some people say, you brag! You can't predict the rise and fall of the market!

I really can't predict the rise and fall of the market. The stock market usually continues to rise after I clear or sell off my positions.After I was full, the stock market continued to fall.I have never bought the bottom, nor escaped the top, not once! But I do generally buy when it is relatively cheap and sell when it is relatively expensive. I always like to work against the market. All the time. In the end, it turns out that this method is not bad, although it looks like a fool in the short term.

Well, stock investment is easier said than done! Behind every seemingly simple thing, you have to endure some pain that ordinary people can't bear, and it is true. Come on, everybody! I wish you a fortune!