A Casual Talk on Investment Timing in the Crypto World: How to Approach the Past?

Today, we continue our casual discussion on investing and time.

In previous episodes, we talked about respecting the objectivity of time,

so as not to be overly subjective,

and to avoid exposing our short-term behaviors aimed at getting rich overnight.

We also discussed the long-term and effective nature of time.

The power of compound interest brought by time tells us to invest early,

and to be patient.

In the next few episodes, I want to talk about attitudes and approaches toward the past,

the present,

and the future.

Due to time constraints,

I will divide this into several episodes.

In this episode, I plan to discuss the attitude and approach toward the past.

Before talking about the attitude toward the past in investment,

I want to first discuss the attitude toward life.

Actually, many of our current pains,

and many negative memories, are caused by an improper attitude toward the past.

Because we have memories,

we carry many past experiences with us,

which prevents us from enjoying the present.

For example, if you hate someone very much,

you feel annoyed whenever you see that person.

If it’s a stranger,

you definitely wouldn’t hate them.

Your hatred might stem from a history between you two.

This hatred ultimately harms only yourself,

because of your memories and history.

Sometimes, it’s better not to have memories,

or to forget bad memories,

so that they don’t affect your current quality of life,

and the quality of future life will also improve.

You might think this is the spirit of Qiqiao (a Chinese cultural reference to a kind of self-deception),

but I think at this point we should embrace the spirit of Qiqiao,

because it’s more practical.

In investing,

we must study a company’s past,

which is a fundamental attitude in company analysis.

Studying a company’s past is a necessary condition.

A company’s good past doesn’t necessarily mean it will be good in the future,

but if a company’s past is bad,

then we generally ignore it.

For example, if a company has a history of fraud or its financial reports have always been poor,

and it has been unprofitable,

then we can basically disregard it.

We don’t need to invest in every company,

just one or two are enough.

For those with a poor past, just discard them.

Is it possible that they might improve in the future? Yes, it’s possible.

But this is a low-probability event,

like college admissions,

where they definitely look at a student’s high school grades.

You can’t pick a poor student.

A poor student might become a good student,

but that’s a low-probability event.

However, if a student has consistently good grades,

then they are likely to do well in the future.

Can a good company suddenly become terrible? Yes, such cases exist,

but from an investment perspective, this is also a low-probability event.

Investing requires probabilistic thinking.

We look at a company’s operating history and financial reports,

whether its management is honest,

whether there are any misconduct or untrustworthy statements,

these things provide reference for our future decisions.

They are not fully correlated,

but they are necessarily related.

Bad companies should definitely be avoided,

good companies can be considered,

and then further verified from other sources,

to confirm their quality.

So, this is a filter,

a company’s past operations serve as a filter.

This is the attitude toward the past in company analysis.

On another note,

some people like to remember their cost basis after buying,

for example, after buying at a high price and realizing the company isn’t as good as imagined.

You might not want to sell,

because you think you bought at a high price,

and selling now would mean a loss.

The correct approach is to judge buy and sell decisions based on the current state of the company,

which has nothing to do with how the stock price moves.

At this point, you should correct yourself,

and avoid the sunk cost fallacy.

Don’t remember the purchase price of your past investments,

including when you bought at a low price.

When the stock of a company you bought cheaply rises,

and you think you’ve made a profit, you sell.

But you shouldn’t do that,

what if the company’s value and operations have improved,

and become even better than you imagined?

In that case, don’t sell just because you bought cheaply.

We need to develop the ability to forget the cost,

because our purchase cost has nothing to do with the future value of the company.

Cost only plays a role in providing a margin of safety at the time of purchase,

beyond that,

we should forget about the cost,

and forget about the price,

so as not to interfere with our judgment of the company.

Because the final selling price has nothing to do with our initial cost.

There are also some attitudes toward past experiences in investing.

We have successes and failures,

and these experiences are actually very useful.

If we succeed in investing,

and do so with the correct method,

I recommend regularly reviewing and reflecting.

Just like NBA players sit quietly before a game,

and think about when they played their best.

To succeed,

if you can repeat your previous successful methods,

try to recall those successful experiences.

What you did then was correct,

and it led to success,

which produces a sense of joy,

and this encourages you to maintain good habits.

In case of failure,

you can also remind yourself often,

so as not to unconsciously repeat the same mistakes.

So, this is the attitude toward the past,

and summarizing success and failure experiences is very helpful.

Unfortunately, most people lack this awareness,

and tend to have selective memory.

They might have lost 100 times,

won 10 times,

and only remember the wins.

Eventually, they think they are very capable,

so we should consciously cultivate the ability to summarize successful methods.

To summarize,

the attitude toward the past is: in company operations,

we need to analyze the company’s past,

bad is unacceptable,

good doesn’t necessarily mean it will be successful,

but bad is definitely a no-go; forget your purchase costs,

so they won’t interfere with your holding process,

the purchase price has nothing to do with the future; develop your correction skills,

constantly replay successful experiences in your mind,

to reinforce good thinking habits.

In fact, most investments are like playing golf,

improving your correction ability,

for past mistakes,

you should record them,

and review them after some time.

This way, the probability of repeating the same mistake when handling current issues will be reduced.