Investing Psychology: Why Retail Investors Always Get Fleeced

In 30 seconds: This is the core of CLEC’s “Investing Psychology” guest series (three talks) — investing is psychology, not technical analysis. Lecturer Frank Fang notes that over the long run only about 10% of traders make money consistently; the other ~90% break even or lose — not for lack of IQ, but from overconfidence and loss of emotional control. Even Newton was ruined in the South Sea Bubble. Graham (Buffett’s teacher) sums it up: “The investor’s biggest enemy is himself.” The cure is to return to buy the index and never sell.¹

Why 90% of retail investors lose

Frank Fang splits traders’ long-run outcomes into three groups: about 10% make money consistently, ~20% break even, and the rest keep losing — nearly 90% who don’t profit. Why:¹

• Overconfidence and ignorance: thinking “trading stocks is easy, you can get rich quick.”
• Chasing highs and dumping lows is the human default: stock rises and you don’t hold it → panic at missing out → greed pulls you in; stock falls → fear of loss → you sell. This is the same point as 常見的投資錯誤 and 崩盤是朋友.
• Fed by the news: financial news is mostly stale, or even bait “someone paid a writer to produce,” designed to lure retail in to be fleeced. Genuinely valuable information rarely lives there.

The winning 10% don’t rely on luck — they control emotion with reason and can read whether the crowd is greedy or fearful right now — the core of 崩盤是朋友.¹

Newton’s lesson: high IQ, low EQ

Frank uses Newton as the “archetypal retail investor”: Newton invested in the South Sea Company, made a small profit, sold, watched it keep rising, piled in heavily near the top, and finally lost far more than his original gain. He could compute the orbits of the heavens but not the human heart — high IQ, low EQ, undone by psychology. The point: investment failure is usually not a knowledge problem but a psychology problem.¹

💡 Why are the masters’ books all about psychology? Frank observes that Buffett and his peers “rarely teach you to read candlesticks or how to time entries” — their books are almost entirely about the psychological level. “If the market could be seen through, it wouldn’t be the market.” Investing is more an art of controlling yourself than a one-plus-one-equals-two technique.¹

Graham: you only need two things

Quoting Benjamin Graham (Buffett’s teacher): investing doesn’t require a high IQ; you only need “stable emotions” and “the ability to think independently,” and you should invest and can make money. “The investor’s biggest enemy is himself.”¹

🔗 The other two talks in the series: Part 2 (Wen Chang) uses long-term return charts to show the power of buy-and-hold and risk control (1950-to-present and 220-year real-return data — from the same body of return arguments as 為什麼是納斯達克100 and 價值一億元的投資人生講座); Part 3 (James Chen) is James’s own psychological addendum. All three converge: seeing through your own psychology and holding the index long-term beats any technical analysis.¹

How do you stay calm through ups and downs? (2026 James supplement)

The guest series names “emotion is the enemy”; in 00560 “You didn’t lose to the market, you lost to your emotions,” James added an operable technique for steadying emotions:²

• On the way up, think of your position; on the way down, think of your cash. Market up → think “my QQQ/00662 position still in the market keeps making money”; market down → think “I still hold a cash position, very safe.” That way you’re comfortable when it rises and glad when it falls — that’s the right mindset. “If you’re comfortable whether the market rises or falls, that’s a good mindset.”
• Same event, reframe it and it stops hurting. E.g. you deleveraged on James’s cue and the market then spiked — you can think “I lost out on so much gain” (painful), or “good thing I only sold 10% of the leverage; my remaining 50% position really did gain in the market” (grounded). Same event, two angles, totally different states of mind — and it isn’t over yet; there’s plenty of time.
• Stability matters more than return; you can earn less, but you must never lose emotional control. FOMO, fear, and greed are your enemies in the market. You can miss out on gains, but the moment you lose control you’ll buy high and sell low. “In the market you can earn less, but you must never lose your emotions.”
• A high cash position is your defense; don’t tear it down to chase a rally. If you chase the rally and dismantle your cash position, you lose your defensive power. The sole function of asset allocation is to let your emotions stay stable — running a cycle / adjusting the allocation is itself meant to steady emotions; if it makes you more panicked, it hasn’t served its purpose and needs adjusting.
• The only things you can control are “asset allocation” and “emotion.” The market is unknowable and uncontrollable; the only knowable, controllable things are these two — and controlling emotion is hard and takes constant practice.

🐯 The tiger joke: A man sees a tiger and doesn’t run, and gets eaten. God asks, “Didn’t you know to run from a tiger?” He says, “The books said so, I knew — but I’d never seen a tiger, so I didn’t know that was one!” — No matter how many books you read, without the market’s baptism, books are just piles of words; when the market actually comes, you still won’t recognize the tiger. This is why James takes everyone through it firsthand (see 家人朋友賣掉了該怎麼辦, 投資沒有標準答案).²

⚠️ Summarized from CLEC’s “Investing Psychology” guest series — the lecturers’ personal experience, not investment advice. The series has no corresponding deck; content is from transcripts. The “~10% win, 90% don’t” split is the lecturer’s rough framing and Newton’s gain/loss amounts are spoken historical approximations — none should be treated as precise data.

Footnotes

1. CLEC “Investing Psychology” series, Part 1 by Frank Fang, long session 00392, 2022-12-14 (retail 90% lose / Newton / Graham @00:00–08:30). Part 2 Wen Chang (00394, 2022-12-21, long-term return charts); Part 3 James Chen (00395, 2022-12-28). None of the three has a corresponding deck; transcripts at raw/transcripts/長篇/00392…, 00394…, 00395…; statistics and historical amounts are spoken approximations. ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶ ↩⁷

2. CLEC James, 長篇 00560 “You didn’t lose to the market, you lost to your emotions: the truth about retail investing,” 2026-04-11, up→position / down→cash, stability over return, only allocation and emotion are controllable @17:30–26:30, the tiger joke @36:00–36:30. Matching deck “a settled heart is the cornerstone / stable emotions bring profit” page in raw/docs/簡報資料/00560…. Transcript in raw/transcripts/長篇/00560…. ↩ ↩²