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Why is stock investing the most difficult industry in the world to succeed

by qindan 2 months ago in investing
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Why is it so hard to make money in the stock market?

I have written hundreds of investment notes. If God had decreed, "When you die, all your notes will be burned and no one will remember what you said. You will leave only one for posterity." Then I will choose to leave this article without hesitation. I have been in the secondary market for more than 10 years and have contacted at least 1000 investors, but less than 10 of them have successfully achieved financial freedom, that is, the success rate is less than 1%. Here those securities service industry people are excluded, such as investment banking elite, brokerage bosses. They don't make money trading stocks, they make money providing services. Also get rid of the people who get rich from the egg, such as the public fund manager, who is in charge of $1 billion and earns 20% for Tijimin, who gets millions for himself. I'm talking about those grassroots who started from tens of thousands of yuan to tens of millions or even over 100 million yuan. I am not saying that these people are more successful than the heads of securities firms and elite investment banks (in fact, they make less money than the heads of securities firms), but we can copy their path, but we cannot copy the path of the heads of securities firms.

The first part discusses why it is so difficult to make money in the stock market. My advice is to leave the professional stuff to the professionals and not mess around with it yourself. But the vast majority of shareholders will not listen to my advice, they know there is a tiger mountain, inclined to tiger mountain line. Well, since you want to fight tiger, that must first correct their bad investment habits, so there is the second part of the content, discusses 99% of investors will have investment mistakes. But knowing your flaws isn't enough. You have to be resourceful. Which brings us to the third part, which is what are the prerequisites for success. Which factor is the most important in influencing the success of investment.

Part one: Why is it so hard to make money in the stock market?

We may as well take divergent thinking to explore the answer to this question. Why did E-commerce entrepreneur Jack Ma become China's richest man? But can't chemical entrepreneurs reverse the trend and become China's richest man? Why did the Internet industry produce so many billionaires this decade, but not the chemical industry? Is it because people in the chemical industry are idiots and people in the Internet are geniuses? Such a reflection, the answer quickly emerged: because the Internet is a new industry, the chemical industry is an old industry. In an old industry, it is almost impossible for a new company to kill the old one. So it's very, very hard to make a name for yourself in these traditional industries.

This leads us to the first law of investing: It is very difficult for a new player to get rich in an old industry!

So how old is the stock investing industry? The answer is more than 100 years. Has there ever been a technological revolution in the stock investment industry? I think there were three. The first technological revolution was charting technology, technical analysis, and the first people who used technical analysis made money, livermore, Gann. But none of their imitators succeeded. The second revolution was value analysis. The first people who used value analysis made money, such as Warren Buffett, but the people who followed them didn't succeed either. The third revolution is quantitative trading (big data analytics), but it is not yet fully fledged.

Why is the oil industry more profitable than the garment industry? The answer is that oil is a monopoly, while the garment industry is open to competition.

Hence the second great law of investing: the lower the barrier to entry, the lower the profit, and to survive in a low-barrier industry, you have to be the first to do it.

This is very easy to understand, there is a threshold to exclude most people, the fewer people, the easier it is to make money. The lower the bar, the more people get in. It's like a 1,000-man arena. To be a champion, you have to kill 999 people. So what is the threshold for stock investment? Zero threshold! When you apply for a cleaning job, you will at least be interviewed to see if you are female and physically disabled. But what about investing in stocks? Want you to have an id card to be able to deal with to open an account formalities to any securities company only, want you to go up to put 1000 yuan in the account only, can buy 100. In the stock market, how many competitors do you need to kill in order to win the 1%? The answer is 30 million. There are more than 100 million A-share accounts in China, with A conservative estimate of 30 million a-share investors excluding zombie accounts and one person and two households. If Jack Ma started out with 30 million e-commerce platforms, what do you think is the probability of his success? If Ma Huateng invents QQ, there have been 30 million similar QQ products on the market, how high do you feel the probability of his success? I think it's 0%.

I wonder if anyone has ever thought about a question: there are many generals in history who have read Sun Zi's Art of War, but how many generals have won one hundred battles? Basically zero. Is Sun Tzu's Art of War a hoax? Did you see it or not? Similarly, over the past two decades, there have been a succession of people imitating Warren Buffett, but is there anyone who finally becomes the second Warren Buffett? I don't think so. Is Buffett lying to us and never telling us what really works? Many people may blame their failure on their lack of academic skills, but is that really the case? Isn't there a person with a higher IQ than Warren Buffett? No one is more diligent than Warren Buffett? Is there anyone with more talent than Warren Buffett?

To answer this question, we need to introduce the third great law of investing: the stock market is a zero-sum game.

What is zero-sum game? It's a fight between competitors, and there's only one between you and me. If I survive, it must mean that you die. If you're alive, that means I'm dead. Extended to the stock market, it is I buy means you sell, if you do not sell, I will not buy, until you are willing to sell I am willing to buy, the stock can clinch a deal. The money I make must be your lost profit. There is no such thing as everyone making money and leaving. You can think of the stock market as a casino, where the buyers and sellers are the gamblers playing mahjong. When the market ends, someone must leave with a loss. It is impossible for all four to leave with a profit.

In a zero-sum game, the difficulty of competing depends not only on your own level, but also on the level of your opponent. Because you're trying to kill the other person, and it's easy to do it if the other person is mentally retarded, but it's very difficult if the other person is as mentally retarded as you. And it's even scarier: your opponents will evolve because they're human, not pig, just like you!

This explains why reading Sun Tzu's Art of War 300 times still fails miserably, and studying Warren Buffett for 20 years still loses money on investment. Because your opponent has read Sun Tzu's Art of War 500 times and studied Warren Buffett for 30 years.

This evolving competition will lead to effective investment strategies failing in a very short time, because the other person will not fall down three times in the same place. The first two times you make money from him with a fixed investment method. On the third time, he will not be fooled again and your investment strategy will fail. So there is no such thing as a "one-size-fits-all" winner in the stock market. All victories have a time limit, some just last longer, some shorter. As long as you win long enough to accumulate enough wealth to withstand subsequent failures, such as going from $1 million to $100 million and then crashing from $100 million and losing 90% to $10 million, you're still a winner in life. But if you go from $1 million to $2 million and you start falling, you lose 90%, you're down to $200,000, you're the loser in the stock market. Many people's victories are so short-lived that they end up losers in the stock market.

Any one of the three laws above will cause 90% of entrepreneurs to fail. The cruelty of the stock market is that the three laws are in effect at the same time, so less than 1% of the people who make a lot of money investing in the secondary market can achieve financial freedom. This environment is not to the will of the people for the transfer, even if your IQ 800, a day to study the stock 48 hours, you can not escape the above law to your constraints. To put it bluntly, there are times when you think you have worked very hard, but your ambition is always hard to achieve. In fact, the problem is not your own quality, but you have chosen a road of no return from the beginning. Life choices are more important than hard work.

Having said that, I'm actually trying to convince 70% of investors that the stock market is not your ATM, so get out of here. However, it is estimated that less than 1% of people can be persuaded to quit. People always have a kind of confidence, especially those who are good in other industries. They have spare money in hand and think they are particularly smart, so they will gamble on the stock market. The remaining 30%, in fact, is engaged in the work related to securities, since the choice of this industry, there is no retreat, difficult to resign back home to sell sweet potato (to tell the truth, selling sweet potato than fry money)?

Well, if you choose to stay and fight, you need to know your enemy first. In the second part, I want you to know your friend as well as your enemy, because 90% of investors make the same mistakes.


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