Why is investing hard?
There is an asymmetry between the reaction to bad news and good news that all of us fall prey to
Say you analyzed a company and thought it had great prospects in the future. You invest in the share and watch it go up 100%.
Would you exit the share and book profit?
OR
Would you buy some more at that point to capitalize on further growth?
Investing is hard; not because finding great opportunities is difficult but sticking with it is. Doubling down on an investment that is doing well is challenging. Especially when you are far ahead in the game. With liquid assets, the temptation of exit always remains.
We are often a product of our experiences. The problem with that experience is…
Bad news always arrives in a flood but good news rarely so. Also, a person telling you that a share is going to halve in the next 6 months sounds smarter than a person who tells you that the share is going to double in the next 6 months.
You would have heard of stock market crashes. Have you ever heard of stock market inflation; where the stock market goes up 10% in a day? You would have heard of markets being closed because they fell so fast, but have you heard of markets being closed because they were rising so fast?
On bad days, you can watch your stock crash in hours. But you have to watch it rise over weeks, months, or even years.
This is true even if you are investing in private markets. You can feel like your investment is sinking by the hour, but it may take months before you feel it has gone up.
Humans evolved to identify risks and to protect themselves from those risks; not to anticipate windfalls in the future. So fear find more purchase than optimism.