Stock Market Is a Warzone
and consistent winners win at the end
The title sums up my opinion about the stock market — that place is ruthless. It is a zero-sum game, and more people are losing than gaining there. As an investor, you have to be ready to fight the war. However, this war is unique.
It is a War of You vs. Yourself
Investors are not actually “hurt” by other investors. Investors also do not “win” against other investors. It is a personal war — a war between how you perceive the world vs. how you react to it.
This warzone reveres those who can contain themselves during extraordinary moments.
When the market drops, what do people do? They tend to sell stocks, anticipating a further decline. They would argue that the stock market is too risky now because the price keeps dropping.
When the market rises, what do people do? They tend to buy stocks, following the wave of profit. They would argue that the stock market is now less risky because the price keeps increasing.
Their arguments sound right, but they are fundamentally wrong.
Let’s say stock A is worth $50. The company is still profitable and faces no significant vicissitudes. When the price declines to $30, shouldn’t you be happy to acquire it at a discounted price? And if it rebounds, let’s say to $60, you will generate a 100% return.
Now let’s say the price surges to $60; shouldn’t you be less attracted to it? If you want to generate a 100% return, the price should go up to $120.
Which one is more likely? Stock A going back to the original price, or Stock A going to a higher valuation double its worth?
When you understand this concept, you will start earning money. Trust me.