Learn to recharge your resilience｜A reading of "Richer, Smarter, Happier"

Recently, whether it is friends around you or the investment community you have joined, with the sharp recession of the market economy, there are fewer and fewer voices talking about the stock market or the currency circle. From another perspective, during the bear market, there are many people who focus on their own business and continue to learn new knowledge. It is a good strategy to continue to survive in the market, and it can also improve resilience and reduce one's vulnerability when the market declines, waiting for the moment when winter turns to spring.

Share a book I recently read, " Richer, Smarter, Happier, " by William. Green brings together the top investors he has interviewed over a 25-year period, including Joey Greenbray , Edward Thorpe , Charlie Munger , Sir John Mark Templeton , Nick Slip , and more. The investment and life principles of this book are rich in content and high in gold content. In terms of investment operation, they have the characteristics of focusing on essence and value investment , while the mentality side focuses on how to strengthen investors' self-resilience . This time I will share How to use resilience to survive this bear market.

📝 Five principles of resilience

1. Must fear uncertainty .
2. Reduce or eliminate debt, avoid excessive debt, and be mindful of expensive expenses so that you don't have to rely on the mercy of strangers.
3. Don't think about short-term profits or beating the market, you should focus more on how to make yourself "shockproof" in order to avoid financial collapse.
4. Beware of overconfidence and complacency.
5. Be aware of what risks you are exposed to and always have to seek a margin of safety.

✅ Must fear uncertainty:

Howard Marx 's investment principles often refer to the concept of impermanence , that " change is inevitable, the only constant is that everything will change ", so we can't predict, we can only prepare for the market. The impermanence of the crisis, improve the ability to deal with the crisis.

Therefore, instead of predicting the market, it is better to trust the fundamentals and market prices, not to follow the news, wait patiently for the ups and downs of the market to fluctuate, and buy stocks whose market prices are much lower than their intrinsic value.

 Personal example:
When the epidemic hit the economy in March 2020, when individual stocks fell sharply, he put all the child's lucky money into his own stock account, and bought an index-based ETF and a financial stock: Hekujin (TPE: 5880). The investment principle is set as long-term investment. The main force is index-based ETFs, which focus on accumulating the number of shares in the long-term, and reinvesting them through annual dividends. Another financial stock is optimistic about its physique and risk, and takes advantage of the low market price to earn money. In the future, the average cost of buying this file is 19 yuan, and it will not be sold in batches until the price reaches 30 yuan in April this year. Among ETFs, since the margin of safety purchased at the beginning is large enough, even if the market has been sharply revised down for a period of time, the profit on this ETF account still maintains a positive return. Because of the long-term investment mentality, we will operate in this way in the future. I hope that when my child is in college, the annual dividend alone can pay for his tuition.

✅Reduce or eliminate debt, avoid excessive debt, pay attention to expensive expenses, so as not to rely on the mercy of strangers.

Howard Marx said: "Do you know where financial autonomy comes from? Living within your means and keeping your expenses below your income is a very important concept. The less you push yourself to financial limits, the less vulnerable you are."

The most likely vulnerability in the market is to borrow excessively, open up leverage that you cannot afford, and expose yourself to a liquidity risk crisis. If the market suddenly changes, the subsequent development may directly send you out of the market after graduation.

Since May of this year, I have heard a lot of news of excessive opening investment and graduation. Maybe you can make more money, but if you have a debt, you may not be able to turn over in a short period of time or even a lifetime!

✅Don't think about short-term profits or beating the market, you should focus more on how to make yourself "shockproof" to avoid financial collapse.

There are three investment principles involved here: focus on your own circle of competence , and choose stocks that you understand well. Diversify investments, but not too much, to avoid affecting the profit margin, and you must know how to choose a good basket, or it will be in vain to spread among a bunch of bad baskets. Don't blindly follow others. The life/investment of others is not your life/investment. Learn to think independently, and all actions must suit your personality and ability.

✅Beware of overconfidence and complacency

Acknowledging your own limitations and acting within reason can be a huge advantage, and vulnerability is the mother of strength.

✅ Be aware of what risks you are exposed to and always have to seek a margin of safety

One of John Mark Templeton 's investment principles is to pay attention to emotions: "When ordinary people invest, they will be affected by emotions, because in the face of huge profits, it is easy to become overly careless and optimistic, but in the face of major profits. When you lose, you become overly cautious and pessimistic.” Don’t let market sentiment break the originally set rules of the game.

 Personal example:
The U.S. stock market invested in, knowing that the high-speed growth stocks that are shining in the bull market, when the economy is entering a slowdown and recession, the downward revision rate is relatively large and fast. Losses within 20% will be forced to -50-60% before letting go, which will erode a lot of the profits made in 2021, but it is fortunate that we have clearly recognized that we will let go of some targets, so as to keep in the market that continues to decline. Throw in a target silver bullet whose market price is well below its value.

The deck of cards that everyone is born with cannot be controlled, but we can control how to play this deck. Good cards may also be broken, and bad cards can be exchanged for good cards through patience. As long as you have confidence, Be patient, learn more, and never give up.

Finally, share a concept of Howard Marks :

To be a top and good investor, you have to be like "water".
When water encounters a round bottle, it will naturally flow into the "round" bottle and become a circle; when it encounters a square jar, it will naturally flow into the "square" jar and become a square shape.
Therefore, a successful investor must "do not complain", "do not resist", "do not exert force", and face "the world is impermanent and ever-changing", like "water", "go with it", "accept it", and then Capture the senses, let the mind be like the tip of a needle, observe calmly, think expanded, and make the right response at the moment of changes in the world. This is the "way" of water, and it is also the "way of investment".

I am a Talf house, sharing my life experience, learning, reading and other experiences through text. Keep it for yourself and for those who are interested, thank you for reading.