Moduers Story – At War with Investment Instruments
Investment is not something that can be measured solely in numbers because I think investing is an art. Psychological factors play a role here. You may be good at arithmetic, but emotions play a big role if you are not psychologically mature. When emotions take over logic, losses will begin.
There is a great line in the book of fighting arts – Sun Tzu, The Art of War: ”If you know the enemy and know yourself, you need not fear the outcome of a hundred battles. If you know yourself, but not your enemy, you will suffer defeat for every victory you get. If you know neither your enemy nor yourself, you will give up every battle.”
Today there is no war, but in investing, the analogy is almost the same as war. We can assume the enemy here is our portfolio (any asset or investment instrument we have).
When we know the nature of the assets we have and our tendency and choose the method and assets that fit our risk profile, then the advantage is visible. When we know our risk profile, but we choose assets that we don’t know or don’t match our risk profile, then the result is 50:50; either we can get gain or lose. But the most dangerous thing is if we do not know our investment instrument and do not know our risk profile, then be prepared to lose money.
I also experienced this in the early days, for I did not know the “enemy,” so I suffered a big loss. Slowly I started to try from the beginning, not from identifying the “enemy” because obviously, it was more difficult than recognizing myself. Therefore, I started to map out the risk profile to identify myself. Once I got to know myself, I began to learn the nature of the “enemy.” Initially, it was the same. The level of profit and loss was almost equal, aka almost no results. Still, when I got to know the “enemy” more deeply, my winning percentage increased. The portfolio starts to grow and starts to earn.
Of course, this cannot be used as an excuse for complacency because I just recognized the “enemy” and learned much. Hopefully, by getting to know it better and knowing myself better, I can implement a better “war” strategy to achieve more victories. What is your investment story? Have you got to know yourself and your investment instruments?
Moduers Story is a column written by Moduit users. All experiences are personal and have become the responsibility of each writer.
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