“The biggest enemy of investment is yourself.”
A must-read for anyone seeking to understand the interplay between human nature and markets!

"The Investing Mind" draws on behavioral economics to help you avoid the most common mental pitfalls when investing, and introduces the processes the world's best investors use to protect themselves.
What they considered most important was focusing on the process.
A process is a set of rules that determine how we proceed with our investments.
From Sir John Templeton, who expanded his investment horizons globally, to George Soros, who wrote investment journals, to Bruce Berkowitz, who killed his company, the world's greatest investors have integrated various methods into a single process to prevent reckless investing.
The reason they systematically organize their investment process is because they know that if they don't, it's human nature to fall back into old, bad habits.

Forget about investing behaviors that increase losses, such as buying and selling at the worst possible time, setting unnecessary target prices, entering the market when doing nothing is better, trading too frequently, and predicting the future.
Through "The Investing Mind," I recommend that you refresh your understanding of what kind of mindset you should have when investing, learn how to build a solid foundation in investing, and build a strong foundation for your own investing mindset.

This book, "The Investing Mind," examines the most common behavioral problems and mental traps investors face and offers strategies to curb these innate tendencies.
In the process, we will also examine how the world's best investors have dealt with behavioral biases that negatively impact their investment returns.
We hope that we can learn from their experiences to increase our returns and reduce our losses.

--- p.11

Even if everyone became a stock analyst, memorized Benjamin Graham's "The Intelligent Investor" and regularly attended Warren Buffett's annual shareholder meetings, most would find themselves unable to resist hot company IPOs, momentum strategies, and investment fads.
People will still be tempted to analyze stock charts technically while day trading.
Securities analysts will likely overreact.
Ultimately, even well-trained professional investors will make the same mistakes that other investors always make.
And for absolutely immutable reasons, they cannot help but make these mistakes.

--- p.22

When a sell-off occurs in the midst of extreme chaos, it is unlikely that sellers will act rationally.
In hindsight, it becomes clear that fundamentals had no influence whatsoever on investment decisions.
… … I always think that you should wait until the bottom is reached and then pick the optimal time to buy (as if you knew exactly when the bottom would be reached), but it turns out that such a strategy has a serious flaw.
Historically, rebounds begin with small trades at the bottom.
Then, when the market stabilizes and the economy begins to recover, competition with other buyers becomes much more intense.
Moreover, when recovering from the bottom, the stock price rises very quickly.
Therefore, investors should be able to invest even in painful bear markets, recognizing that things could get worse before they get better.

--- p.43

This tendency to overestimate one's abilities is amplified by the illusion of control.
We believe we can influence outcomes, and we have an illusion of control even in the strangest of places.
For example, people are four times more likely to buy a lottery ticket that allows them to choose their own numbers than a ticket where the numbers are randomly assigned.
It's as if choosing your own numbers increases your chances of winning.

We also often mistakenly believe that we can control something as arbitrary as a coin toss.
For example, if you ask people to predict the outcome of 30 coin tosses and the situation is manipulated so that everyone gets it right half the time, those who get it right early on will mistakenly believe that they are better at predicting than those who started off poorly.
--- p.48

What happens when you become overconfident in the market? Of course, traditional economics would say no one is overconfident like that.
Also, according to the extreme form of efficient market theory, stock markets cannot actually exist.
Why? In an efficient market, when a stock price is fair, no one wants to trade, so trading volume is zero.
However, if overconfidence is added to one of these models, volume and turnover will explode.
Trading volume increases because everyone is confident that they know more than others.
--- p.68

Another great investor who knows how to distinguish between signal and noise is Warren Buffett.
When investing, he doesn't discuss earnings forecasts for the next quarter or rely on excessive information.
Instead, say this:
“The way we write is very simple.
I am simply trying to buy stocks of companies with excellent fundamental capital conditions, run by honest and competent people, at a reasonable price.
That's all”.

--- p.103

… … The financial sector has an extremely short memory.
So the financial crisis is quickly forgotten.
As a result, even when the same or nearly identical situation arises again a few years later, a new, young, and very confident generation welcomes it as a surprisingly innovative discovery that will shake up the financial and economic world.
Among the fields in which humans operate, there are few that fail to appreciate the value of history as much as the financial sector.

My favorite quote about the financial sector's lack of historical awareness comes from Jeremy Grantham, chief strategist at GMO (whom we discussed in Chapters 2 and 11):
When asked, “Do you think we’ll learn anything from this mess?” he replied, “I think there will be a ton of lessons learned in the short term, and quite a few in the medium term.
But in the long run, you learn nothing.
“We can see this by looking at historical precedents.”

--- pp.173~174

Investing in a direction contrary to others is as painful as suffering social pain.
Contrarian investors buy stocks that everyone else is selling and sell stocks that everyone else is buying, which is socially painful behavior.
Psychological research shows that following such a strategy can be as painful as breaking your own arm periodically.
This is absolutely no joke!
But as arduous as it may be, becoming a contrarian is a necessary strategy for successful investing.
As Sir John Templeton said, “You can’t achieve great things unless you do something different from the majority of people.”
Keynes also pointed out that:
“The main principle of investing is to go against the popular opinion.
“Investments that everyone recognizes as valuable become less attractive because their prices are too high.”

--- pp.202~203

I was very surprised to learn that some fund managers monitor their portfolio performance in real time.
They can see in seconds how much money they are making or losing.
It is hard to imagine a worse practice than this.
If you've carefully considered and selected stocks that you believe will have high long-term value, there's no need to check their performance every day or every second.
My personal portfolio is filled with stocks that are expected to perform well in the long term, but I can't avoid short-term losses, so I rarely check my portfolio performance.

--- pp.218~219