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).

6 comments :

Singapore Man of Leisure said...

LP,

That's why there are a lot more "parrots" out there ;)


Just because I know the ABC "definition" of something does not make me wiser or a skilled practitioner.

They are probably just as clueless when it comes to the difference between knowledge and wisdom :)


Small Time Investor said...

Good reminder. This is another form of "make hay while the sun shines."

la papillion said...

Hi SMOL,

Haha, because I'm a good student in school, I took a few years to learn that being book smart is not the same as being smart. Still learning :)

la papillion said...

Hi STI,

Actually this is just me ranting. I see so many instances of pple quoting that there is fear in the market that I am motivated to write this post lol

hyom said...

Hi la papillion,

Some says a financial speculator needs to be unemotional. Be as cool as a cucumber. Keep your head while others are losing theirs. Take the emotions out of the game. I find this unnatural as a human being. I prefer to take advantage of what comes natural to me.

As I get more experienced, I always act on my fears and it has saved me many many times from the markets. I usually act on my greed and the results has so far been not too bad although it has failed badly sometimes. I have read that fear and greed is the enemy of the speculator. My experience tells me they can be our best friends too.

la papillion said...

Hi hyom,

I agree with you. Whoever is 100% rational is not a human being but a delusional robot thinking that everyone is also rational. The reality is that human beings are always emotional. You cannot take away the emotion part and still call that person a human.

Acting on fears/greed...all about execution and sequence of events. Maybe you have a stronger gut feeling that most :)