Friday, September 13, 2019

Sometimes, it's wise to be fearful when others are fearful

Recently, maybe because of the market downturn, I keep hearing people say that opportunities lie within crisis. Well, you know, the Chinese equivalent of it, weiji. It's either that, or it's Warren Buffett's be greedy when others are fearful.

Whoever taking these words of wisdom at face value is crazy. As with all other such aphorisms, the context matters. A lot. Applying these condensed advice to all context is insane. Usually I see people applying them to whatever situations they are in to justify, to rationalise and to convince.

I think if your only reason to buy a stock is because there is fear in the air or there is danger everywhere, you had better buck up. If anything, that is just a starting point to investigate, to probe, to find out. It cannot be the sole reason to buy. In trying to become a contrarian and go against the crowd, you merely react against the crowd instead of reacting with the crowd. Both are equally bad because there is no independent thought involved.

In my opinion, whenever a crisis is imminent, first survive, then thrive. In order to maximise the opportunities presented during a crisis, I must first guarantee my survival. I raise my cash level, I save hard and I make sure my standard of living of my family won't drop below a certain level. I do all these while the sun shines and the winter is not here yet. Then I wait. When 危机 (crisis) becomes 转机 (a turning point), presenting a 时机 (opportunity), I will be there in all my capacity to take advantage of this 良机 (excellent incipient moment).