The Story of a Clueless Investor Who Can't Read the Market (Mostly a True Story)

Many superior investors use blogs and YouTube to read the market and showcase their investment strategies.

You, too, having stepped into the world of investment, catch a glimpse of such a world and study investing in your own way.

You read several books, watch famous YouTube channels, and sometimes learn how to read charts and economic indicators at seminars. You might even pick out recommended stocks from investment magazines.

Then, fully prepared, you open a brokerage account and buy the stocks you've set your sights on. With this, you feel like a full-fledged investor.

Nearly 30 years ago, there was a man who made his investment debut in the same way.

There was no internet or online brokerage yet. Of course, low-cost index funds like the All Country World Index didn't even exist. The word 'FIRE' didn't exist either.

It was an era where the mainstream idea was that investing meant buying low and selling high, and making money by trading (many investors still think this way today).

That man had been taught that if you study at school, your grades will improve; if you work hard at a company, your performance will improve; and your salary will also go up.

So, he thought that if he put in the effort to study, he could 'win' at investing. Since there was no internet, he studied by reading books. ROA, ROE, PER, PBR, free cash flow, finance theory, and so on...

Investment guru Warren Buffett says, 'Diversification is protection against ignorance. It makes little sense if you know what you are doing,' and 'It is enough to invest in a few stocks you know well.'

The man had studied enough. So, he was sure that the stocks he chose were just ones no one else had noticed yet, and they would surely rise from here on. Diversification was unnecessary.

From among the many companies, he chose stocks that were undervalued by the market, predicted future market trends, and poured his funds into them with high hopes.

The stock rose just as the man had predicted.

A brokerage salesman told him, 'I never thought that stock would rise,' which made him feel good.I have a talent for spotting stocks that even the pros don't understand.

By the way, he easily sold that stock when the salesman recommended taking profits. He learned long after that the stock price had more than doubled afterward.

From then on, the man continued to 'read the market' and buy secret stocks that 'only he had chosen'.

These were bank stocks that were said to never go bankrupt before the bubble burst, or airline stocks that were called state-owned enterprises. He also bought electric power stocks before the Great East Japan Earthquake, wanting stable dividends.

Also, in the early 21st century, when there was no conflict between China/Russia and the US like there is now and the global economy was doing well, he bought ETFs to invest in overseas stocks. He also invested in REITs, which had just made their market debut at the time.

The man thought he could read the market. He believed the stocks he chose would rise. Even when the stock price fell after he bought it, he told himself it was only a temporary factor and bought more (this is called averaging down).

In the process of disposing of non-performing loans after the bubble burst, banks went bankrupt or were absorbed one after another. The flagship airline, once called the wings of Japan, went bankrupt. The stock prices of electric power companies sank to less than half their value due to the earthquake disaster.

Global stock-linked ETFs also fell to less than half their value during the Lehman Shock. REITs, for their part, dropped to one-third of their value.

Even so, the man patiently held onto the remaining stocks. However, the stock prices at best moved sideways, and the days just went by.

The man became desperate, sold all his stocks, and withdrew from the market.

As if it had been waiting for that, the market began to rise steadily. It was the beginning of the Abenomics market.

It was then that the man finally realized.

He realized he was just a lame, clueless amateur investor who couldn't read the market at all. He had simply fallen victim to the Dunning-Kruger effect.

The main players in the market are financial institutions and institutional investors; they graduated from top-tier universities, possess specialized knowledge, and use high-spec computers to perform high-speed trading.

They share information among themselves that is borderline insider information, which individual investors could never know.

And in exchange for making a profit themselves, they develop, advertise, and sell products to ensure that the losses are borne by the suckers (individual investors).

Why on earth did a mediocre salaryman from a mediocre company who graduated from a third-rate university think he could win by reading the market in such a world?

The man stopped trying to read the market.

He also stopped looking for secret stocks.
He reads market conditions and corporate performance at a minimum, but he does not make predictions.

And he began to diversify his investments into index funds and super-excellent companies that everyone knows.

Even if famous economists, analysts, or one of the world's three greatest investors tried to predict a market crash, or if representatives of active funds tried to mock and provoke index investing, or if pseudo-economic journalists shouted that you should stop investing, he continued to buy steadily.

He continued to buy whether the yen strengthened or weakened. He ignored Bitcoin even when it became popular, and he continued to buy even when earthquakes occurred, wars started somewhere, governments changed, or pandemics raged.

Before he knew it, the man was nearing retirement age.

And when he noticed, his assets had exceeded the amount he had dreamed of when he started investing.

The man realized something else here.

That you can build assets even if you can't read the market, or even if you don't read it at all. And he also realized why so many individual investors fail to build assets.

Even now, there is a trend in the investment world where being a superior investor means predicting the market and correctly guessing which stocks (or currencies) will rise in price.

Furthermore, there is a tendency to make people believe that these superior investors are the only ones who can become the 'Okuribito' (millionaires) everyone admires and achieve 'FIRE'.

On the other hand, thanks to the internet, the number of young investors who engage in smart investment behavior has increased.

However, financial institutions are still—or rather, even more cleverly than before—relentlessly using every trick in the book to solicit and advertise, trying to make prey out of these smarter investors. They scheme to get them to buy and sell based on predictions.

The man took a long detour, but he reached (or so he thinks) the optimal investment solution by the end of his working years.

Although the man himself is still on his investment journey, considering his age, he decided to leave behind an investment will so that his sons and the next generation can build assets without making the same mistakes.

The Story of a Lame and Clueless Investor (End)

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The articles posted are written as a personal hobby, and the information provided may not be appropriate for all readers. Furthermore, there is no guarantee regarding its truthfulness, completeness, accuracy, or timeliness for any specific purpose. Please make all investment decisions at your own discretion and risk. I cannot be held responsible for any losses incurred.