By Dr. WANG Ming-min

Many people around us have been involved in stock speculation, real estate speculation, and fund speculation for many years, but they seem to have never thought about what the definition of "investment" is.

According to the Dictionary, investment refers to the allocation of funds to achieve a certain purpose. In other words, the prerequisite for investment is to have funds, or to have capital.

Unfortunately, many people find their capital dwindling after a period of investing, ultimately leaving the market in despair. Investment gurus Warren Buffett and Charlie Munger have both criticized "reckless speculation" in investing. This "reckless speculation" can be summarized as investors frequently buying and selling without a clear strategy or sufficient research, or blindly following trends.

It's important to understand that in the investment world, every transaction incurs costs, including commissions, stamp duty, and so on. Without considering fluctuations in stock or property prices, each transaction actually reduces an investor's total assets. This is why exchanges, casinos, and real estate agencies can consistently make money.

Frequent trading is the most typical example of haphazard trading. Many investors believe that only frequent buying and selling can generate more profits, but in reality, frequent trading not only incurs high transaction fees but also deviates from sound trading strategies, eroding investment returns and even leading to continuous losses. In any market, short-term fluctuations are heavily influenced by emotions, making them difficult to predict. Overly focusing on short-term price changes and engaging in irrational trading behaviors (such as chasing highs and lows) easily leads to the predicament of "buying high and selling low," ultimately resulting in lower returns than a long-term holding strategy due to the double whammy of transaction fees and poor decision-making.