Why 90% of people lose money in investment?

1. It is far more exciting to chase for the next "hot" trade than to spend some time to understand the underlying business of a business. Stocks that are recommended by expert, media or friends seems to be "safe" but in reality, this are illusion.

2. By failing to understand how a business work such as revenue, capital allocation, return on capital etc, it's like driving a car without knowing how to drive it, sooner or later, accident will happen

3. Failure to acknowledge human limitation aka biases. As a human we have many form of biases built in such as recency bias, overconfidence bias, information bias, confirmation bias etc. Not knowing how to deal with it will lead to effect such as short- termism, grievances, loss of capital and most importantly, psychological damage.

4. Faulty thought process. Some people prefer to judge their result on the end result itself instead of the model / thought process itself. For example, instead of focusing on quality of management or durability of the business itself, most people prefer to judge whether the share price will go up or down instead. They seek "reasons" for it such as asking for others opinion, studying currency effect on revenue, worrying why some major shareholder disposes shares, predicting the next quarterly results etc. For most, it may seems helpful but in reality these are noises that distract.

✨ Written by Lai Y Keat