Do not participate in "Loser Games"

In 1975, Charles Iris published an article in the Financial Analyst monthly, describing investment as a "loser game" for the first time ". At that time, iris observed that in the entire investment field, thousands of people rushed forward to compete for the "undiscovered" stock in front of them. These people were trained to look at the problem in the same way, constantly making "unforced mistakes"-this is a term for tennis and eventually becomes a dynamic-based "Championship ". That is to say, fund managers must first defeat their competitors to defeat the market. To achieve this, they have to increase short-term transactions. The final result is "booking a miserable ending ", sometimes it also causes huge losses, so the pursuit of winning profits from the market naturally evolves into a return within the fund manager. The reason is that the active investors believe that they can defeat the market is based on the following two assumptions: 1. the liquidity of the stock market is an advantage; 2. institutional investment is a winner's game. However, Iris does not agree with this statement. "due to significant changes in the past 10 years, these assumptions are no longer applicable. "On the contrary," market liquidity is a kind of debt, not an asset, and institutional investors will not perform well in the market for a long period of time, because fund management has become a loser game. "

Iris concluded that most successful investors are not necessarily very intelligent people, nor are they people with millions of yuan in research budgets, not necessarily those who are lucky enough to earn $1000 in a stock. On the contrary, they are those who seldom make mistakes in their investment career. Golf offers us an example of a good loser game. The winner of Sunday's professional golfer Association Championship is not necessarily the one with the farthest hits, not necessarily the one with the best clicks, or the one who completed the game first. The winner is the one who made the least mistakes in four rounds of competition. This is the only difference between golf and most other contact sports, such as football and hockey. In a contact match, the results of the match, Including tennis, are determined by the winner, this person must use his technology and muscle strength to earn a majority of scores in terms of overall strength. In golf, the final result is determined by the loser's behavior. For example, Tiger Woods won the championship mainly because his opponent made more mistakes than him. Woods can hit 10 balls at the normal level. If one of his 64 competitors makes a few mistakes and hits 11 balls at the normal level, woods will lose the championship. The final result is indeed Beyond woods's control, so he must rely on other opponents to make more mistakes than him. Bowling is also similar. Every player starts with an ideal 300 point. When more balls are not hit, the score is lost. The final result of the game is determined by the loser because he didn't hit more balls.

If you understand the rules of this loser game, you have taken a key step on the road to success. Warren Buffett was able to succeed because he had made very few mistakes in his 40 years of career. Does Buffett make no mistakes? Yes. Buffett admitted that the most common mistake he made was the "drag-and-drop bad habits", which made him miss the opportunity to refresh the stock, or he could not sell the stock in time. However, none of these two types of errors have caused them to lose the capital, but only to lose the opportunity. But few will think of Buffett's main principle-not to lose capital. Not to lose capital is probably the most important tool for long-term investment success. No investor, including Buffett, can avoid periodic losses on a single stock. Even if you want to buy only those low-price stocks that are really credible, unexpected errors will still happen. Some people say that I can use investment diversity to ensure security. In fact, investment diversity cannot prevent losses. Even if you hold 100 types of stocks, you will always experience a strong attack on market risks. If the risk is reflected in a downward skewed market, it will cause all stocks to fall together, "Under the nest, there are eggs in the nest "?

The history records clearly show that the long-term return is closely related to the length of your shareholding and the price of your stock, the existence of frequent transactions and indifference to basic risks is like a heavy tie to investors, which often leads to mistakes for short-term investors. The final conclusion is that it is easy to win a game that "beats the market", that is, never participate in the game.