Friends often leave messages expressing regret that they didn't sell their shares in XX Company at the peak in 2021, and then sigh that if they had sold at that time, they would be in a much better position to buy now.

Ah, every time I see such messages, I can't help but roll my eyes, but I will still patiently ask, why not ask yourself, what was the original motivation for buying? Was it to look forward to the long-term development of the company over the next five or ten years, or was it just to make a quick profit?

I often emphasize that the most important thing in our investment is the consistency of buying and selling logic. In other words, it is to form a logically consistent closed loop.

Assuming we buy based on the fundamentals and the logic of value investing, then we can only sell based on changes in the fundamentals and the logic of value investing.

Similarly, if we buy a certain sector for the purpose of making a quick profit or speculating on a theme, then when this theme recedes and the sector enters a downward trend, we should sell.

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And you absolutely cannot do the opposite! Not only should you not do the opposite, but you should even use your own closed-loop system to enforce your behavior, to prevent yourself from being impulsive. This sentence is very important, but I think few people can understand the truth behind it, so here we will explain it additionally.

Why do we need something to enforce our behavior?

It is very difficult or even impossible for a person to control themselves with their own brain. After all, the human brain has two systems that exist at the same time, one is a slow system controlled by consciousness, and the other is a fast system controlled by the subconscious.

The time for the two systems to process information is completely different, so many times, our rationality completely can't keep up with our reaction speed. For example, when our rationality tells us to focus on work, we start browsing our phones after a few minutes of work, and once we start, we can't stop. After browsing for a long time and feeling a bit tired, it seems that we suddenly remember, "Oh my God, I wanted to work now!"

Similarly, even though we know that many of our worries and emotions are unreasonable, we can't help but worry and think about them.For instance, even though we clearly understand the importance of value investing and accompanying good companies through their growth, and we are aware that Mr. Market is a manic-depressive patient, often irrational, and that short-term stock price movements do not indicate much, it is the long-term performance that reflects the true state of a company or a market. Yet, when prices fall, we still want to sell immediately, doubting there is a problem.

Subconsciously, we are often influenced without realizing it. You could do better, but you are led by the subconscious, falling into the form that our genes want us to become.

So, at this time, to let consciousness rather than the subconscious work more, we need to eliminate "ambiguity" and make everything in our lives clear. When should we do what, and what principles should we follow to do it.

Let me give an example from my own experience. I found a long time ago that my working day state is quite good because it is basically filled with work, and I know exactly what to do at different times. But on rest days, everything becomes inefficient. I do things haphazardly and don't even know what I've done, and the day passes in confusion.

Until one day, I started to "eliminate ambiguity" by writing down what I should do at each 20/30-minute interval of the day with a pen, and checking off each item after completion. For example, the following is my schedule for a weekend.

When I really wrote down what I wanted to do one by one according to the time period, it became very clear what I should do at what time of the day, and I would not "ambiguity" to brush my phone or do nothing, or have a lot of things to do but don't know where to start and then give up.

After starting to arrange in this way, I found that the efficiency of doing things has become much higher, and I can do more things in a day. The most important thing is that I will not think nonsense at all. To some extent, life is a competition to eliminate ambiguity. The clearer your plan for yourself, the more sober you are, and the more vague your understanding of yourself, the more confused you are.

Can things really be as perfect as you think?

So, back to investment, in fact, we often need to rely on processes, systems, and standards, and control ourselves through some fixed agreements.We understand that Mr. Market is mostly illogical or has a confused logic most of the time. In Graham's words, he is a "manic-depressive patient". The more Mr. Market behaves like this, the more we need a consistent system to have our own scale in the market that always goes to extremes, so as to maintain a greater degree of rationality and not be led by Mr. Market.

Well, let's go back to the complaints of the students in the previous article. Even if he was doing short-term trading and really had the intention to sell at that time, he would definitely not sell at the highest point in 2021. If he had the intention to sell, he might have sold it a few months earlier when he saw it was overvalued. How can he ensure that he can sell at the high point? Anyway, the director thinks from another perspective, if he wants to sell the company because it is overvalued, he will most likely sell it as soon as it just touches the overvalued range, because he will be afraid of losing it. People who really want to sell will generally sell before the market is most enthusiastic, and the selling point will be much lower than the highest point. They are looking for a safe and reliable way.

Moreover, let's think further, what we see now is that those companies touched the top in February 2021, but at that time, how would you know that February 2021 would touch the top? What if it doesn't touch the top? Then you sell early, and the market continues to rise, and people around you are making money. Can you really not regret it? Will you not rush in again because you see others making money?

At that time, there were many old value investors around the director who sold when Moutai was at 50 PE, and finally picked it up again when it was at 70 or 80 PE. In that case, it would be better not to sell at all... Even if you really escaped the top at the beginning, will everyone really start buying now? Perhaps at the end of 2021, 2022, 2023, countless times, you have already been unable to restrain that restless heart and rushed in.

From the real people and things around the director, there are actually some people who cleared their positions near the high point in 2021, but rushed in again not long after the decline, and what they rushed in was other companies. After three years of a bear market, the loss was much more than if they had not cleared their positions and held the previous companies honestly.

So, things are not so simple. Many people think that if they had done something at the beginning, they would have been better. However, they don't know that this is because we have a rearview mirror and know what will happen later. Looking back, it seems very reasonable, but when you are really in the situation at that time, you won't think so much.

Therefore, before we invest, the most essential thing to do is to set our own investment strategy, and it is best to write it down and look at it every day, to clearly tell ourselves whether we are doing long-term or short-term. If it is long-term, as long as the company's fundamentals have not changed, we should not sell at any price in the short term, because the underlying logic of value investment is that buying stocks is equivalent to buying a company. Since you are buying a company, how can you think about making a little difference? If you are doing short-term, then you must strictly follow the discipline and make a clear decision on when to buy and when to sell before buying.

Of course, here we just said long-term and short-term in a very general way, in fact, there are many dimensions inside, the director will not talk about it here, in short, the essence of investment is not to compete for understanding of the company or the market, but more to compete for the victory over human nature.