How to Increase Your Investment Win Rate: 1) Don't Get Caught Up in the Crowd, 2) Be Strict with Results

While much of human life is like this, investment, in particular, is a battle against future uncertainties. Therefore, no matter how confident you are, unless you are God, you cannot guarantee the outcome, and thus we can only talk about probabilities.

If the reason why we need to engage in long-term investment is that we cannot time the market, then the reason why we need to diversify our investments is to secure a sufficient number of trials for the probabilities to manifest.What if this investment had a 99% success rate, but that 1% happened to occur this time, and I had bet everything on it? I would simply be kicked out of the market. We diversify our investments to prevent such risks, but simply increasing the number of investment assets without any thought is no different from index investing. In fact, it is inefficient in terms of consuming a lot of time and resources. Therefore, we need to diversify our investments within the scope of finding alpha.

So, how can we increase our investment win rate? There are many ways, but if we approach it from an investment mindset perspective, we need to 1) not get caught up in the opinions of the majority, and 2) be strict about the results.

1) Don't get caught up in the opinions of the majority.

As social animals, humans generally constantly interact with others and seek their opinions. This is an innate disposition, so we cannot judge whether it is good or bad, but the problem is that this tendency often applies to investment as well, and this generally leads to undesirable results.

Some people are insecure and lack confidence in their own decision-making, so they ask many people and try to follow the majority opinion, but this is never advisable. This is because most people tend to see only what they want to see, and in investment, what they want to see is facts that are favorable to their position.If I have a long position, everything in the world looks beautiful, but if I have a short position, it seems like everything is about to collapse. Due to the tendency of most people to selectively choose and accept only the necessary parts from the whole, the opinion of the majority is rarely correct, and it often leads to significant errors. When the majority believes that the market is good, it means that most of them have long positions. But who will take new long positions then? If there are no more buyers, the only thing left is a decline.

Another problem with being caught up in the opinions of the majority is that the outcome is the average level. The opinion of the majority can only approach the average level of that group, which means becoming just an average investor.I've mentioned this before, but one of my main hobbies is Go. In Go, there's something called 'handicap Go' where people with different skill levels can play against each other by having the weaker player start with a few extra stones. Generally, there are fewer strong players and many weaker players, so many people look at the game from the perspective of a weaker player. If 10 weaker players get together and discuss the outcome of a game against one stronger player, will they have an advantage? No, they won't. No matter how much the 10 weaker players discuss, they will only come up with a conclusion at the level of a weaker player.

To move from being a weaker player to a strong player, you first need to make a commitment to self-improvement through rigorous effort, and the group you seek advice from must be significantly stronger than yourself. Seeking advice from an unverified group is meaningless. Collective intelligence only becomes meaningful when the group is reliable.

2) Be strict about the results.

Since investment is a battle against many future uncertainties, we can only talk about probabilities in the end. And even the most brilliant experts cannot win in every idea.Therefore, all investors can only receive a mixture of successful and failed results, and we must be strict about our results.

In other words, for successful results, we must be aware that luck played a significant role, and that even with the same idea, we could have easily failed if luck hadn't been on our side. However, the problem is that some people think the same way about failed results, which is never advisable. For failed results, we need to review each element that influenced them one by one, and deeply reflect on and learn from our mistakes. If we simply dismiss a failure as just bad luck, we will only repeat the same mistakes next time.

Some people believe that entering the investment industry and accumulating experience and knowledge over a long period will make them much better investors than beginners, but this is not always the case. Factors affecting investment results include more than just knowledge and experience, and many of them are close to innate qualities, making them difficult to change. It is especially difficult to change them as an adult. Therefore, if you want to improve even a little, you need to make up your mind and work hard.

In fact, in the long run, if the win rate exceeds 50%, you can continue to accumulate profits as long as you manage your risk well. Also, it is important to continuously pursue ideas with an asymmetric profit structure where the upside is large and the downside is small, rather than just focusing on the simple win rate. In any case, it is incredibly difficult for an investor with a 60% win rate to increase it to 65% or 70%. Only a small number of people who do not follow the opinions of the majority and are not lenient with themselves can gradually increase their win rate.