Most people's value investing is just value trapping

There are many people claiming to do value investing in this market, but in fact most haven't carefully understood the value of the investment assets, nor can they calculate it. They usually see something rising and then jump in, leading to two diverging paths: one is lucky and the price continues to rise, making them feel awesome, confident, decisive, invincible, even looking down on their regular income; the other is less lucky, the price drops immediately after they buy, and then they start seeking psychological comfort, looking for evidence to hold onto it, claiming they are value investors, buying more as it falls—initially they are okay, but as it keeps falling and they keep buying, until it drops too much and they see no end, panic sets in (at this point, they are no longer value investors). Especially when they see other assets soaring, they start cursing that asset and everyone related to it, shouting that they’ve been “weeded out,” angrily selling off, chasing higher prices elsewhere, entering a new cycle. Is that how it is? People who talk about value investing are usually the ones caught in traps; their premise for holding onto an asset is often in a loss-making state, unwilling to cut losses, constantly brainwashing themselves into thinking they are value investors. Once they turn a profit, they start losing sleep, and before long they can’t hold on anymore—if they can’t hold, then they just tell themselves it’s safe to take profits, that taking profits is always right, that not taking profits is floating gains, and that cashing out is real profit. If it rises again later, it’s none of their business; they only want to earn guaranteed money, not risky gains. Is this typical? Do you see many people like this? But if it’s value investing, then what is value? You don’t have any logical method to estimate its worth, so where does the value come from? What does it mean to earn guaranteed money? Is it just because you got lucky today and reverse-engineered the result, earning money, but that doesn’t mean your earnings are certain—these are just self-soothing thoughts; tomorrow you might do the same and lose money. People think they are doing value investing, but they are just applying a very simple judgment: when something falls a lot, it will rise; when it rises a lot, it will fall back—right? Essentially, most people are only applying this one principle. So when prices fall, they don’t cut losses because they believe that after falling so much, it must bounce back; selling now would mean big losses. And why do they panic when prices rise? Because they are always thinking that after a rise, a correction is inevitable; if they don’t cash out now, profits will be given back. Is that really true? Many don’t realize that the so-called mean reversion assumes that prices fluctuate around value, but only if your buy point is exactly at the equilibrium point of value—that is, only if you buy right in the middle. But are you really buying at the “fair value” point? That’s impossible. The logic is simple: from a probability standpoint, it’s almost impossible because prices constantly fluctuate around value, and at 99% of the time, they are either overvalued or undervalued. It’s only a momentary return to the value level—how could you just happen to buy at that exact moment? Second, value is always changing. You say, how much is Moutai worth? You can estimate it based on its past financial reports, but if you use Yong Ping’s method and its performance declines year after year, what are you estimating? The premise of your estimate is that its “value” remains roughly unchanged over the long term, so you can judge whether the current price is over or undervalued. That’s easy to learn—any fool can do it. But the problem is, if your judgment of industry trends is wrong, then it’s a structural error. Later, if you try to estimate its monopoly position, brand moat, business model, future cash flows, etc., it’s all useless. So don’t call your guessing of ups and downs “value investing.” If you can’t estimate value, where does value investing come from? You’re just unwilling to cut losses and believe that “it will rise after falling too much.” The final result is often small profits taken multiple times, but then you get caught in a big loss—buying more as it falls, losing all profits, and even worse, some assets, even if you wait 20 years, will never come back. If you don’t understand the asset itself, don’t screen carefully, just buy and follow the rule of taking profits when it rises a bit, adding when it falls, constantly shifting profits from winning assets to losing ones in an attempt to “average down” (another misconception I’ve mentioned many times). After enough times, you’ll encounter an asset that goes to zero—or even if it doesn’t go to zero, it will never rise again. With enough attempts, this is almost 100% probable. So is your strategy doomed? Because you will keep buying bad assets, adding more as they fall, until all your money is gone. You may not even realize you’re doing something that will inevitably lose money long-term—possibly worse than gambling. What’s right? I’ve said that stop-profit and stop-loss are both wrong; as long as you prearrange your capital allocation ratios, there’s no need for stop-profit or stop-loss, because you can accept total loss on any single asset. All you need to do is to fully capitalize on a good asset when you’ve bet correctly, hold for 5, 10, 20 years—whether it doubles, twentyfold, or two hundredfold—if it remains a good asset in your mind, don’t care how much you’ve already earned in your account, don’t think about taking profits—assets are assets, stocks are assets, coins are assets, money is assets, what’s “safe”? When you take it out, it will eventually need to be moved into the next asset. So what are you “safe” in? Aren’t you just moving assets around? When a transfer turns into “money,” does that make you happy? Investing is a long-term game; it’s not too much to say you can do it for a lifetime. Don’t look at tomorrow; look at 5, 10, 20 years from now—how much could it rise? How high is its ceiling? Only by earning disproportionate multiples in a few assets can you support multiple wrong choices or bad luck in others. Forget your costs—if it’s profitable, it’s good; whether you’re making or losing money, it’s good. If it’s bad, it’s bad; whether you’re making or losing money, it’s bad. Your job is to hold good assets, sell bad ones, regardless of rise or fall, profit or loss—nothing more. #我的Gate交易时刻