1. In the introduction to his book, “The Principles of Value Investing,” John Bogle says:
“The intelligent investor, based on his faith in rationality, tries to block out emotions such as hope, fear, and greed, and hopes that in the end, intelligence will prevail. Hope, fear, and greed depend on the market’s short-term predictions, while his faith in rationality is based on the real market’s long-term intrinsic value. In this sense, long-term investors should be ‘philosophers’ rather than ‘technicians.’”
John Bogle emphasizes that investors should not be swayed by short-term market forecasts, but should invest based on long-term intrinsic value. He argues that investment should be approached with philosophy, not science, and that emotional factors should be eliminated through rational judgment. He also points out that short-term forecasts are difficult due to the complexity of the market, and that stock prices are merely derivatives of the real economy, and emphasizes the importance of a long-term investment strategy. The following content is from his book.
2. I have seen long-term investments replaced by risky, short-term speculations.
Chapter 1 discusses the issues with this shift and suggests fixes using history, data, and fresh ideas.
Having been in this field for a long time, I have seen firsthand how traditional, prudent long-term ‘investments’ have been overtaken by aggressive emerging short-term ‘speculations.’
However, looking back on the experiences I briefly outlined in the introduction,
I see a need to discuss in depth not only the problems these changes have created,
but also the proposals for fixing the nation’s financial system through a broader perspective, historical perspective, and compelling data.
That is the subject of Chapter 1.
3. While science helps us understand the world, investing remains a complex mix of logic and emotion, with stock prices reflecting a company’s profits.
First, let’s look at the results of the changes in the financial system. Science and technology have been successfully used to identify causes and reasons in the real world, and have helped us predict and control our environment. This success has led to the belief that science and technology can be productively applied to all human activities, including investment. However, investment is not science. Investing involves not only rational behavior but also emotional behavior.
Financial markets are so complex that it is difficult to isolate a single variable as in a scientific experiment. The records of financial markets show that short-term predictions of stock price movements are always accurate. Stock prices are temporary and intangible. This is because stock shares themselves are merely derivatives of the profits generated by the corporation and of the corporation’s massive and productive investments in its physical and human capital (think about why they are called “derivatives”).
4. Aiming to be “philosophers” rather than “technicians,” astute investors suppress feelings like hope, anxiety, and greed in favor of reason and the market’s long-term inherent value.
The intelligent investor, based on his trust in rationality, tries to block out emotions such as hope, fear, and greed, and hopes that in the end, intelligence will prevail. Hope, fear, and greed depend on the market’s short-term predictions, while his trust in rationality is based on the real market’s long-term intrinsic value. In this sense, long-term investors should be ‘philosophers’, not ‘technicians’.
The serious contradiction in today’s American financial sector stems from this difference in perspective. It is becoming increasingly clear that a “hold out” strategy is far more productive than market timing or moving from one stock to another or mutual fund, yet financial consumers and shareholders are easily swayed by the frequent and rapid fluctuations in investment assets thanks to the cutting-edge information and communication technologies provided by financial firms. – John Bogle, Principles of Value Investing
Walk away from these traits
Go check the link down below
https://insight-room.com/5-extra-rules-of-emotional-investing-for-your-money/
https://insight-room.com/5-rules-of-emotional-investing-for-your-money/