Reading Notes on "Long-Term Buying"

I have shared these contents with @Wan Chai Widow

Many people have read "The Four Pillars of Investing" and criticize "Long-Term Buying" for being highly repetitive, but I have a different view.

"Long-Term Buying," written by Professor Zhou Guannan of National Chengchi University, makes many localized adjustments and is written in a way that resonates deeply with Taiwan's context. It's possible that after reading "Keep Buying," he rewrote the book based on Taiwan's situation.

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Sharing some golden quotes here

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Through my upbringing, I learned from my father that relying on capital turnover is the way to accumulate wealth quickly; the returns from labor are limited. From my mother, I understood the power of knowledge; relying solely on labor cannot break free from a life of toil.

——"Long-Term Buying"

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The "disposition effect," discovered early in financial literature, refers to the tendency of average investors to sell winning stocks and hold onto losing ones, resulting in most retail investors taking profits early on good, profitable stocks, while the stocks left in their hands are all losing ones. Does this sound familiar?

——"Long-Term Buying"

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Common behavioral biases include:

- Hindsight bias

- Representativeness bias

- Overconfidence

- Mental accounting

——"Long-Term Buying"

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The focus of this book will be on these psychological issues in investing.

When investors are overconfident, phenomena such as excessive frequent trading and over-concentration of investment targets occur. However, the costs of short-term trading, such as transaction fees and taxes, are high. Frequent buying and selling of stocks will also lower the investor's returns.

As can be seen from the research results in Chart 5 below, when transaction costs are not considered, the difference in returns between the group of investors who trade the most and the group who trade the least is not significant. But after deducting transaction costs, the net investment return of the investors who trade the most is significantly lower than that of the group who trade the least.

——"Long-Term Buying"

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Many people don't consider themselves retail investors, yet they continue to implement active, institutional-style operations with retail resources and information (which is actually noise).

Do you really think Warren Buffett analyzes the market by himself? No, behind him is an investment team hundreds of times more professional than you, waiting for you to make mistakes and profit from them.

——"Long-Term Buying"

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