The dimension of good assets is based on current cognition to make long-term judgments. If their development curve and future growth trend and key inflection points are already met at present, then they will be placed in the basket of good assets for comparison with other assets.
The core question is how to hold good assets long-term after discovering them?
Hold on; the key point to emphasize here is not from the rational level, but more from the psychological level. Therefore, we need to establish some methods and rules while we are still rational to ensure that we can maintain relative rationality when we are in a FOMO state.
How to build this architecture?
Here we must mention the 'position management method,' which requires dividing the asset pool into four pools:
The first one is the cold wallet, mainly used for storing coins, creating various obstacles that make it difficult for you to touch, putting core assets inside, and it will hold about 60% or more of the assets.
The second one is the warm wallet, which is mainly used to manage assets and can provide cash flow relatively safely and steadily, ensuring a relatively stable mindset in extremely pessimistic situations, holding about 20% to 30%.
The third one is the hot wallet, mainly used for consumption, trying out speculative assets, doing product trial experiences, providing experience on whether future judgments are good assets, holding only a few percent of the asset scale, or even less. If this wallet truly expands due to speculative consumption assets, immediately transfer it to the warm wallet or corresponding cold wallet.
The remaining one is the fiat wallet, which has a small principle called the 4% principle: 4% of the asset scale in the fiat wallet equals annual expenditure. Assuming that the previous wallets encountered unexpected events, the fixed deposit interest or treasury bond interest generated by the fiat wallet can basically cover daily life, which can basically be said to be life reserves and isolated assets.
Zhen Dong Twitter @zhendong2020
If you currently hold Crypto assets or Tesla, you need to understand models like complex systems evolution theory, nonlinear growth, and innovation diffusion. Because in today's internet era, the speed, efficiency, and cost of information or knowledge dissemination have seen exponential growth compared to decades ago.
Understanding good assets first requires certain foundational knowledge. A significant reason that hinders many people from holding good assets is that most people currently have a wrong perception of long-term holding, or the greatest enemy of holding good assets for the long term is the enthusiasm for short-term trading. Many people confuse long-term holding with short-term trading.
What does Popper say is the most important thing? The most important thing is more rational humility.
How to analyze what is a good asset? You should continuously make positive expectation, good investment decisions, which have long-term compound interest, rather than doing repetitive and useless work. Humility means knowing that mistakes may occur, and once you realize you have made a mistake, you constantly change and adjust.
Holding good assets for the long term has two key points: one is understanding, and the other is long-term. Understanding can be divided into two types: one is rational understanding, and the other is emotional understanding. How to understand? The constructs made when buying will also act on the cognitive and emotional levels when selling. How to construct when buying? This is about how to understand good assets.
The process of cognitive construction has several points, and all of them will play a role when selling.
The first point is not to ask about those early assets, because they have never sold past the critical point. If you can't understand it at the beginning, then naturally you won't touch it, and you won't sell it later. If you enter when it has already passed the critical point, your focus will be more concentrated when you look back, and your understanding will be very deep.
The second point is to think and verify monopoly from multiple dimensions. If the purchase was because of monopoly, then the reason for selling will only be the disappearance of monopoly or the emergence of a better monopolist. This symmetry can be completely constructed, and understanding the monopoly process will enrich our understanding of user needs and overall potential markets, etc. This process will bring a lot of rational and emotional constructions.
Holding good assets for the long term has two aspects:
One aspect is earning money within the cognitive realm. If you have clearly understood the long-term product roadmap from the beginning and have also achieved it, should you sell at this point? Not necessarily; some people can indeed earn this part of the money, but those who are unlucky may not earn money beyond their cognition.
On the other hand, money is often potentially nonlinear, exceeding everyone's initial cognition. As an investor, one should be able to bear this surprise without predicting the future with the limited rational brain of ten years ago but instead be able to construct that asymmetry to bear the benefits of the future. How to bear the benefits of the future? After acquiring assets, be able to recognize their characteristics, acknowledge that they are good assets, and believe they can perform better than expected.
How to re-invest heavily after selling? It is actually more of a psychological issue, of course, it also includes cognitive issues. In terms of cognition, it means that if the increase in holdings is due to monopoly, then the reason for selling will only be the disappearance of the monopoly or the emergence of a better monopolist. This symmetry can be completely constructed, and understanding the process of monopoly will enrich our understanding of user needs and the overall potential market, etc. This process will bring a lot of rational and emotional constructions.
Q: Why establish this position management system?
I have statistically analyzed some significant decisions I've made in trading, and my win rate is only slightly over 40%, not exceeding 45%. Therefore, later when making major decisions, I would write decision logs, analyzing various situations at the time and my emotions, then analyzing my understanding of world developments and judgments about the future of this event, why I made such a decision and whether I would regret it, and review it again after six months or a year.
In the end, we will find that the world is unknown. Our modeling and rationality of this real world are limited. In the modeling process, we must ensure that we have an open mind and brain.
Some painful mistakes are essentially the information that the real world gives us. Often, whether a person can grow hinges on the real world providing real and effective feedback and information. One should not get caught up in those emotions and should be able to review, think, and iterate afterward.
Q: Which is harder, discovering good assets or selling too early and then re-investing heavily?
Investing heavily is inherently more challenging than finding good assets. Many people around me who hold Bitcoin sold off after gaining some profits, and very few were able to buy back after selling. So, there's no point in discussing buying back heavily. Heavy investment means putting a large proportion of assets into an asset type, which is inherently a challenging task.
When I bought Tesla back then, although I had researched a lot, I still found it hard to make the purchase when it really came to buying, so I could only buy an absolute value. Therefore, I found that human nature is somewhat unaccustomed to such large numbers, including when playing Texas hold'em, I also found that the absolute value of chips growing brings psychological pressure. Although from the perspective of asset proportion, it doesn't seem much, that absolute value will still involuntarily be compared with normal expenditure.
Re-investing heavily after selling is more challenging due to facing mistakes. Acknowledging mistakes is not just about recognizing them; it is a process that requires reconstructing many underlying logics of oneself. Secondly, many times the attitude towards mistakes is also an issue because sometimes it is linked to personal image, making people feel embarrassed to acknowledge mistakes. Some ordinary people think making mistakes is shameful, but many smart people believe that lacking the ability to correct mistakes is even more shameful.
Popper's scientific philosophy framework is also an antidote, allowing us to understand from a philosophical perspective that humanity progresses through these errors. The only means of creating new knowledge is conjecture and refutation, eliminating those erroneous conjectures, and the conjectures that remain are relatively correct. This means that the process of making mistakes is inevitable, but it is also the only path we can find new knowledge.