A bit of logic about investing: big framework and small framework
(Written for those willing to take risks and believe that experience can improve winning rates)
What is the most important thing in investing?
Many people's first reaction is 'making money.' In fact, it's not. The first priority is the ability to manage risks. Before taking action, you need to clarify a few things: how much time and effort will this investment require? How long will it take to break even? Is this venture reliable? Is it about making quick money and running, or can it be sustained? When the market direction is not right, can you withdraw in time?
Ultimately, investing is about understanding your 'investment personality' — that is, your mindset and risk management ability.
1. A good mindset is fundamental. It steadies you on the path of improving your abilities and helps you operate more calmly. How can you maintain this mindset? The key is that you need to have a continuous cash flow to support you. This way, even if the market declines, you won't panic and sell your assets at a loss. Imagine watching the numbers in your account shrink day by day; it feels like being cut with a dull knife, uncomfortable. But if you tell yourself in advance: this money, even if lost completely, I can afford it, and I can sleep soundly — this confidence will help you endure the toughest moments.
2. Patience is standard. The market has cycles of ups and downs, and being anxious is useless. You have to be able to wait.
3. Risk management ability, at its core, is that you must ensure that if you lose this money, your life will not be affected. Especially in unfamiliar new fields, paying tuition (losing money) is almost a necessary path. It feels like taking a confident step forward, only to fall flat on your face. By preparing psychologically and financially in advance, knowing that falling is part of learning, your mindset won't collapse — once the mindset collapses, judgment becomes chaotic, and investing will definitely go wrong.
The feeling of losing money is unpleasant, like being hit by a surprise attack. But as long as the overall direction is correct, don't give up easily. Lessons are also experiences. True risk control also means: if you lose this time, you must ensure that when the next opportunity arises, you still have 'ammunition' (disposable cash) to step in. This is your capital for a comeback.
However, the speed of a 'comeback' varies from person to person: some can dust themselves off and start again in a few minutes, while others may need to wait a day, a month, or even a year or several years for their wounds to slowly heal. With different speeds, the outcomes can naturally be worlds apart. Only by continuously gaining opportunities to 'try again' in a short period can your chances of winning truly increase.
This leads to a crucial principle: try not to borrow money (go into debt) to invest. Think about it: losing money is already difficult enough, and if the money is borrowed, that anxiety will multiply, like carrying a mountain on your back. The pressure of repayment will weigh you down, making it easier to lose balance when you don't see returns in the short term and may even lead to worse decisions. Remember: if you have more money, participate more; if you have less money, participate less. As long as the big principles and directions are correct, continuously participate, review, reflect, and improve, results will eventually come.
So what is the 'small framework within the big framework'?
The big framework: It is the money you can afford to lose — money that, even if completely lost, does not affect your normal operations. This is your safety net, providing a buffer when you stumble.
Small framework: that means within this safety net, investing funds gradually and in batches. Especially in those unfamiliar fields that sound very hot, this tactic can effectively increase our chances of making money.
People can easily fall into the temptation of 'hearing it's very profitable' and impulsively throw all their money in, as if they see a golden path. What happens? Because they are unfamiliar with the rules, or the rules have long changed (the way of playing has changed), their money goes down the drain. The disappointment and regret of falling from a height can only be understood by those who have experienced it. If you're also in debt, that anxiety and heavy repayment pressure will weigh you down, making you watch the next truly good opportunity slip away, powerless to act.
