Thoughts triggered by a question

At first glance, it felt a bit presumptuous, but upon reflection, it's indeed a profound question: although data shows that most active investors underperform SPY in the long run, and even some fund ETFs, many still prefer to pick stocks themselves. So I asked AI, and this is the answer it gave me:

Psychological Factors

• Need for control - People naturally want to take charge of their financial destiny, and active stock picking provides a sense of satisfaction from "making decisions."
• Overconfidence - Many investors believe they can identify undervalued stocks or think they are smarter than the market.
• Selective memory - People tend to remember successful trades while forgetting or rationalizing failed investments.

Practical Considerations

• Enjoying the investment process - Researching companies, analyzing financial reports, and making investment decisions are intellectually stimulating activities.
• Learning and growth - Active investing is an excellent way to understand the business world and economic operations.
• Potential for excess returns - Although difficult, it is possible to achieve excess returns through in-depth research.

For most investors, allocating core assets to index funds while using a small portion of funds for stock picking might be a balanced strategy. This way, they can achieve market-average returns while satisfying the needs and enjoyment of active investing.

Considering the market performance from October to now, I believe many people, like me, have experienced significant drawdowns/losses in their accounts. Some choose to vent in the comments section, while others choose to do nothing.

Perhaps many people followed the advice of influencers and blindly bought certain stocks, only to be unable to bear the huge volatility during the decline, leading to emotional imbalance. But in reality, when we entered the market, we all verified our investment preferences and risk tolerance. Stable players participated in the game of aggressive players, deviating from their usual approach, and the consequences are naturally uncontrollable.

Ask yourself: when buying a new phone, don’t you compare multiple options, check many parameters, research its price, and only buy it when you feel the time is right? So why, when buying stocks, do you blindly follow someone else’s advice without a second thought? Even if you don’t understand technical charts, you might not even spend five minutes to learn about the stock, knowing nothing about its fundamentals or financial information, without asking why you should buy or when to exit.

Recently, something interesting happened. A comment I posted on Douyin years ago suddenly became popular in the past two months. Originally, it was mocking Lei Jun, but no one paid attention at the time. However, given the current environment and Xiaomi’s stock performance, it suddenly gained traction. Has Xiaomi’s fundamentals deteriorated? The most popular display stores in malls, the buzz around it, being taken as a national brand to South Korea, and exceeding car sales targets—it’s not that bad, is it?

In "The Crowd," it is said: rational individuals become irrational and emotional when they join a group.

I saw a fan of a certain influencer in the comments section of Jingtai. After following a few failed trades, they changed their name and profile. This is, of course, regrettable, but returning to the original question, everyone’s capital, position, cognition, and risk preferences are different. Individual stocks carry high risks, and the drops can be terrifying, but ETFs with natural selection are much better, as they have someone vetting and mitigating some of the risks. Wanting excess returns without bearing the downside risk violates the law of conservation of energy.

There are many stars in the stock market, but few long-term survivors. Many friends who were happy to share have been criticized into silence, but many others have made big money. The sun will rise again tomorrow, and fallen stocks may return to their original prices, but our youth and the balance in our accounts may not come back. Take responsibility for your trades.

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