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Why are we afraid to buy stocks that are so cheap after the crash?

by qindan 2 months ago in investing
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Everyone knows that to make big money in the stock market, you have to buy low and sell high

First, the fact that the crash was cheaper and nobody bought it. Stocks became much cheaper after the crash, and both amateur and professional investors were afraid to buy in large quantities, or even sell to reduce their positions. Buffett spotted this phenomenon back in 1979. Zweig found the same phenomenon repeated in YourMoney&YourBrain. Look at China's fund investors, the stock market rose in 2007, the share of stock funds jumped from 220 billion shares to 1041.8 billion shares in a year, more than 1 trillion capital high trapped. In 2008, the Shanghai Stock Index plunged by more than 2/3 in a year, but the fund's share remained basically unchanged. Considering that 45.2 billion new stock fund issues were issued that year, the basic people did not take the opportunity to buy a large number of low, but also sold 50 billion shares. Or look at Chinese fund managers. On August 2, 2010, China Business News published an article titled "How the fund inverse index is refined", which said that according to caihui information statistics, the fund position in 2007 has been maintained at more than 77%. In October 2007, the Shanghai Stock Exchange Index reached a record high of 6124 points, and the fund's position reached more than 80% in the third and fourth quarters, reaching a record high. In 2008, the stock market began to decline all the way, and the lowest fell to 1664 points on October 28. The fund positions also gradually decreased, which were 75.33%, 71.78%, 68.50% and 68.81% respectively in four quarters, falling to the lowest level in history.

Second, explanation: fear of selling after a crash is a knee-jerk reaction. If amateur investors are unprofessional and inexperienced, it is normal to panic after a big drop and dare not buy in bulk even though they know it is cheap. So why do professional investors do the same? In fact, amateur investors and professional investors are human, in the face of a big bull market, the instinct will be greedy to buy, but in the face of a big bear market, the instinct will be scared to sell. Deep inside our brains, flush with the top of our ears, are two almond-shaped clusters of neurons called the amygdala, located symmetrically inside the brain's temporal lobes. It is widely believed that the amygdala is the nerve center where fear memories are built, triggering emotional responses such as anger, anxiety and panic. The amygdala reacts as fast as 12 milliseconds, 25 times faster than you blink. The amygdala reacts immediately to the appearance of fear. The amygdala reacts immediately to the mere thought of fear. A stock market crash, like an earthquake or an avalanche, instinctively frightens everyone. Fear of bigger earthquakes, more avalanches, it's a chain reaction that makes us instinctively flee to safety. Selling risky stocks and holding safe cash is the safest emotional response to the situation.

Third, reflect: to conquer the market to conquer their own. In life we go with our gut, but sometimes in investing we go against our gut. Masters can beat the market because they can conquer themselves first and follow reason rather than instinct and intuition. BrianPosner, a prominent money manager, says, "if a stock makes me feel like I want to get rid of it, I can be pretty sure it's going to be a great investment." Similarly, Christopher Davis of Davis Funds says: Mr. Davis also learned to invest when he was feeling 'scared to death.' "The higher the perceived risk, the lower the share price and the lower the real investment risk," he explains. We like low stock prices when pessimism produces them." (Big money can do this, ordinary retail investors should not be free to copy the bottom.) Buffett repeatedly repeated his secret of investment success in a single sentence: be fearful when others are greedy, greedy when others are fearful. The most important thing in stock investing is not to sell well, but to buy well. As long as you buy it cheap enough, you can sell it at any time and make money, only the difference between more and less. But buying too high and selling at a bad time could be the difference between making money and losing it. Without a doubt, the best time to buy is after a slump. "I always start looking in fear," Buffett says. If I see something that looks attractive, I start buying voraciously." To be greedy when others are fearful, to buy when the market is plunging, not to see, not to think, not even to plan, but to actually do it. To conquer the market is to conquer the masses. The premise is to conquer yourself and go beyond your instinctive reaction. This is the most difficult thing in the world. This is why there are so few investment gurus who consistently beat the market over the long term. Speculation or need to choose a vote, hold a stock for a long time, and insist on doing T every day, in theory, a few years later you will reap huge profits, tens of times the income is possible. But in this process, there are some necessary conditions. The first to hold the stock, is a performance support, medium - and long-term trend to the good stock. If the performance is bad and the problems are constant, even if you have great skills, it is difficult to withstand the momentum of continuous decline. In the market, go with the flow. Secondly, we should ensure the success rate of T. If the day T+0 is successful, it can continuously reduce the cost of holding positions, but if it fails, it will also increase the cost, so every day to do T, you have to have a strong ability to watch the plate and operation discipline, to have a very comprehensive understanding and use of technology, not incidentally trading, to care about the small intraday ups and downs, to ensure the success rate of selling. Third, don't do T for the sake of doing T. Do not force you to do T every day. Sometimes the fluctuation of the stock price on the day is very small, only one or two cents up and down, which is not suitable for DOING T. At this time, you are paying commission to the broker, and the income from doing T is less than the transaction fee and stamp duty.

Fourth, pay attention to T method and opportunity. When the market is good, full warehouse do T, when the market is bad, half warehouse do T; Do T to find opportunities to do T, such as the stock price suddenly straight line pulled up seven or eight points, no sealing limit, must fall, fall may be more than 3%, this time is high throw low suction; If the opening trend is weak, the share price pressure, downward probability is increasing, it is necessary to sell in advance, such as the stock price fell sharply to a certain position after filling back. Therefore, holding a stock to do T continuously, theoretically can make huge profits, but it should be built on the basis of your stock selection and good operation, otherwise it may get reverse earnings, no profit but huge losses. Of course, there is no ability to carry out intra-day T+0 operation, can also choose band operation, the same is repeated to do a unit, the relative risk coefficient is a little bit smaller. Many people don't know the plate T + 0 transaction, thought fry is to fully to earn big money, but there is one error in the first place, is full in all the stock index are below 0 axis running, heavy positions at this time, as long as spend some time, the stock rose can profit, when all the indicators in the oversold condition runtime (above the 0 axis), we have to control positions, Risk prevention comes first. For example, if you have 300,000 yuan of assets, it is enough to hold 3 stocks and allocate about 70,000 yuan for each one, so the extra 100,000 yuan can not only resist the risk of the stock market, but also make money by using the "T technique". Otherwise, you don't have any extra money in your account, and when you find a good stock, you either sell it or watch it soar, and if the market crashes, you can't move.


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