The scariest thing about investing isn't a market crash, it's your own overconfidence

Sana:This time, we're talking about what is truly scary in investing.

When investing, many people fear market crashes.

A certain shock.
The biggest drop in history.

Just seeing words like those might make many people feel anxious.

However, there is something scarier than the crash itself.

It is the state of mind you were in before the crash arrived.

Was the opponent you lost to at that time really the market crash?

Now, let's have Arai-san tell us about it himself.

When it grew to 10 million yen, I was delusional

Booooosh!

It's Arai.

When you're investing, everyone fears a crash.

Of course, everyone finds that scary.

The feeling of your assets shrinking all at once is truly tough when you experience it.
The unrealized gains you had until yesterday disappear, and your bullish feelings suddenly turn into anxiety.

Perhaps the truly scary thing isn't the crash itself.

The scariest thing might be the version of yourself that was getting carried away before the crash hit.

I once grew 1 million yen to nearly 10 million yen in the past.

In about two months, my assets increased all at once.

At that time, I was completely full of myself.

Am I good at investing?
If things keep going like this, will my life change?

Looking back now, I was just riding the market trend.

But back then, I mistook that for my own skill.

I won without having any rules.

The problem wasn't that I won.

The problem was that I won without having any rules.

I had no rules for taking profits.
I had no criteria for stop-losses or exiting.
I barely thought about money management either.

I just bought because it was going up.
I kept holding because I thought it would go up more.

That was the kind of investing I was doing.

As long as it's going up, it stilllooks like things are going well.

But,the moment the market reverses, everything falls apart.

Even when it started to drop, I couldn't sell.

“It’ll bounce back.”
“It would be a waste to sell here.”

While I was thinking that, my unrealized gains kept shrinking.

And before I knew it, the assets that had grown to nearly 10 million yen had dropped to about 800,000 yen.

At the time, I thought I had lost to a market crash.

But that’s not quite right.

Rather than losing to a market crash, I think I lost to my own greed.

When you become overconfident, you run out of escape routes.

When people win a little in investing, they become overconfident.

If I put in more, it will grow more.
If I bet big here, my assets will increase all at once.

Thinking this way, they keep pouring cash into investments.

It is especially dangerous during a bubble.

The atmosphere around you becomes bullish, and your unrealized gains grow.
When that happens, even your own judgment starts to look correct.

But if a crash happens in that state, it is the worst-case scenario.

Your holdings decrease significantly.
You are too scared to sell.
You also have no money left to buy when things are truly cheap.

In other words, you don't just lose money in a crash.

You also miss out on the opportunities that come after the crash.

This is the hardest part.

You know it has become cheap, but you cannot buy.
Even though it might actually be a chance, you can no longer move.

Because you had put everything in.

Because you thought you were the only one who could do it well...

A crash is scary. But it is also an opportunity.

Since my failure of dropping from 10 million yen to 800,000 yen, I have started to create rules little by little.

They are not perfect rules.

Even now, I don't know when to buy or sell.
I sometimes lose to greed.

Still, I have become better than I used to be.

・Do not put everything in at once.
・Take some profits at high prices.
・When it falls from the peak, do not be too greedy and cash out a portion.
・Keep funds available to buy when the market drops.

I've started to become conscious of this.

As a result, I was able to act a bit more calmly during the 2020 bubble.

I was able to sell a shitcoin I had bought at 80 yen per unit for 4,500 yen per unit.

I was also able to sell other coins I had bought at low prices, though not all of them.

And then, the bubble burst.

I was able to cut my losses early and get out.

Conversely, there were many times when I bought stocks that had fallen, only for them to drop further, resulting in losses.

Although I did end up losing money at times, I was able to survive the market crash by having the capacity to buy at low prices.

This experience made me realize something.

A market crash certainly deals serious damage to your assets.

But at the same time, it is also an opportunity to buy quality assets at a low price.

The problem is not the crash itself.

It's whether or not you are prepared to act when a crash happens..

Because I had a minimum set of rules, I wasn't completely destroyed.

Sana:In other words, the most dangerous thing wasn't the market, but you yourself, Arai-san.

Arai:That stings! But I think that's the truth.

Sana:However, it seems the rules to stop an excited Arai-san are still insufficient.

Arai:O-ouch, that stings even more...

Sana:But you've remained here without being forced out because you learned from your failures.
The next important thing is not to repeat the same mistakes.

Arai:Yeah. I can prepare so I don't break next time.
Come on, bring on the crash!
I'll dodge it with ease!

Sana:(Getting carried away again...)

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