Why You Need to Break Free from Crowd Psychology
What's the most important thing in investing? Many people would say it's access to information or analytical skills, but in reality,independent judgmentis the key.
When external shocks like wars or economic crises hit, the entire market gets swept up in fear. Most investors get caught up in collective psychology and make irrational decisions. The problem is that when we're part of that crowd, objective judgment becomes impossible.
This is exactly why Warren Buffett lives in quiet, rural Omaha instead of Wall Street. He stays away from market noise and collective hysteria to maintain independent thinking. Investment ultimately succeeds when you can assess situations coldly from athird-party perspective.
The Psychology of Entering a Casino vs. Investment
Here's something interesting: not a single person enters a casino thinking they're going to lose money. Everyone thinks, "Today, I'm definitely going to win."
Stock investing is the same way. Countless people ask, "What do you think about this level?" or "Would that level be okay?" But when unpredictable variables like Middle Eastern wars explode, all plans crumble.
True investment is about response, not prediction. You need to go in knowing that a 20-30% decline is possible. And you need the conviction to stay unshaken even in those situations.
Stock Prices Are Illusions; The Essence Is Company Value
The hardest part of investing is overcoming the temptation of the numbers right in front of your eyes. Stock prices fluctuate in real-time, stimulating our emotions. But much of this price volatility is driven by human psychological factors.
The volatility created by anxiety, fear, and greed has nothing to do with a company's intrinsic value. The same goes for valuation fluctuations. It's just showing negative numbers due to temporary psychological changes, not reflecting the company's actual value.
For example, when investing in a company like Doosan, what matters is: "Does the U.S. airstrike have a substantial impact on Doosan's sales and operating profit?" If there's no direct impact, the stock price decline is merely a psychological reaction.
Admiral Yi Sun-sin's Wisdom: Those Who Seek Death Will Live, Those Who Seek Life Will Die
Admiral Yi Sun-sin's famous saying, "Those who seek death will live, and those who seek life will die," applies directly to investing.
Most investors fail because theyrun away trying to survive. When they see losses, they get scared and sell hastily. But true investors approach with the resolve to "die with this company."
Of course, this isn't blind stubbornness. It's an attitude only possible when you're convinced of a company's intrinsic value through thorough analysis. And when you have that conviction, the market's temporary volatility actually becomes an opportunity.
The Paradox of Building Self-Trust
To succeed in investing, you need self-trust. But paradoxically, to build genuine self-trust, you must firstdeny yourself.
Just because you invest in Doosan doesn't mean you know Doosan better than Chairman Park Jung-won, right? That doesn't make sense. An outside investor can't know a company better than its owner.
So what can we do? We cancreate investment scenarios and verify their validity through market reactions.
For example, if you set up a scenario like "If this company's stock price exceeds 420,000 won, it will go to 1 million won, even 1.3 million won," you need to observe whether such movement actually appears. If people who are faster, smarter, and have more money move first, increasing trading volume and showing upward chart movement, it's a signal that your scenario is likely correct.
Distinguishing What You Can Know from What You Can't
In investing, you mustclearly distinguish between what you can know and what you can't.
External variables like U.S. airstrikes or wars are unpredictable. But you can analyze how such events affect the intrinsic value of the companies you've invested in.
The key is not the event itself, but the substantial impact that event has on the company's sales and operating profit. If there's no direct impact, the stock price decline is just a temporary phenomenon.
The Secret to 10x Returns: Growth in Company's Intrinsic Value
Many investors get caught up in short-term trading and miss what's really important. Real opportunities for 10x or 20x returns come fromgrowth in a company's intrinsic value.
Investors who discovered companies like Amazon or Tesla early and held them long-term made hundreds of times their investment for exactly this reason. It's hard to find such opportunities through company analysis and financial statement analysis alone.
What's important isthe insight to see future growth potential. And to develop that insight, you need to break away from the crowd's perspective and think independently.
Investment Is a Game
What successful investors have in common is that they perceive investment as an enjoyable game. Warren Buffett continues to invest happily even at over 90 years old.
When you see the essence, it's funny watching the masses go back and forth. In situations where intrinsic value hasn't changed but only stock prices are fluctuating, true investors actually see opportunity.
Money just follows because you understand and play the game well. When money itself becomes the goal, you get swayed by emotions and ultimately fail.
Conclusion: Training to Overcome Instinct
In conclusion, the key to investment success isovercoming instinctive reactions.
Selling in fear and buying in greed is human instinct. But if you follow this instinct as is, you can't survive in the market. Instead, you need to judge situations from a third-party perspective in an independent space and focus on companies' intrinsic value.
To have the conviction to remain unshaken even during temporary declines due to external variables, you need to establish your own investment philosophy along with thorough analysis. And above all, you need the composure to accept investment as an enjoyable game.
Developing the insight to see through the essence without being swayed by market noise—this is the path to becoming a true investor..