As an investor, it is important not only that the company's profits are sustainable but also that the investor's investment method is sustainable. So what is a sustainable investment method? It is to approach it with a probabilistic mindset.Why should we approach it with a probabilistic mindset? Because we will never know the exact cause of our investment results. I'm sure most individual investors won't understand the exact meaning of this, so I'll share a personal anecdote from the past.

In the past, when I was working as an analyst at a securities firm. The main clients of analysts are institutional investors such as pension funds, asset management companies, and investment advisory firms, so brokers and analysts in the corporate sales team who provide services to these clients work closely together. At that time, there was a younger brother in the corporate sales team who was about the same age as me and had a good personality, so we were close even outside of work.

One day, I had a lunch appointment with him. I was in the corporate analysis team and had a sector that I was in charge of, but I didn't think I was going to stay in the Sell-side for long, so I was personally looking at companies in other sectors. Among them, the stock price of one company that I was closely watching started to plummet from the morning without any particular reason. But our company was at the top of the sell window, and the volume of sell orders was overwhelmingly larger than other windows. Looking at the size of the volume, it seemed likely that the selling entity was an institutional investor rather than retail.

I asked him casually while having lunch with him. "There's a stock called A, but our company has been pouring out a lot of sell orders today. Is anything going on?" He said, "Oh, that's an order from a client I'm in charge of. I'm selling that right now." So I asked him why he was selling so urgently. What was his answer? It was a portfolio manager change.

The fact is that a portfolio manager of a fund managed by a large asset management company that my brother was in charge of was replaced, and the new manager sold off all the stocks he didn't like in the portfolio built by the existing manager. And then he meant to start fresh with the cash he secured and put in stocks he liked. Stock A was a small-cap stock, and its weighting within the fund was not that big. The new manager knew that selling a illiquid stock quickly would cause a big impact on the stock price, but it was not my performance anyway and the impact wasn't that big, so he strongly wanted to start fresh as quickly as possible.

Stock A's price fell more than 10% that day. When I went to the stock bulletin board, there were many posts combining media news, known facts, and brain-picking to speculate on the reason for the decline. But who in the market knows the real reason for the decline? Only two people, the manager who placed the order and the broker who processed the order.

You may have heard the saying that investing is like Go, and you need to review it. In other words, it means that you should look back at your investment results and compare them to your initial investment idea when you first executed the investment, and see what you did well and what you did wrong. Of course, it is a meaningful action for your own development.But this way of thinking is based on the idea that the investment results are all determined by my skills. But that's largely wrong. In fact, most of the investment results are determined by luck.

The bigger problem is that not only is luck a high percentage, but we don't even know what's determined by luck and what's determined by skill. To figure that out, you have to find all the market participants who bought and sold the stock during the period I invested, and then understand their reasons for trading. What does this mean? It means it's impossible.The exact cause of the investment results that we think are so important, we will never know, until we die.

Stock B went up in price and I made a profit after buying it. I thought stock B was good for reason C, and that was right? It means no. There is a higher probability that it was luck. Stock D went down in price after I bought it, so I cut my losses and got out. Was my reason E for thinking good about D wrong? That also means it's less likely. It could have just been bad luck. Of course, there might be a few times when my skills are accurately reflected in the results, but I don't know which ones.

What I've learned from working in investing is that there are really countless cases of buying/selling a certain stock at a certain price and quantity. There are investors who trade huge amounts of money for reasons that ants can't even imagine. In the case of large-cap stocks, the impact of these supply and demand noises on the stock price is relatively small, but in the case of small-cap stocks, the impact on the stock price is significant because of the lack of liquidity.

There are individual investors who focus on small-cap stocks, saying that individuals need to focus on small-cap stocks to pursue alpha. They judge whether their ideas were right or wrong based on the movement of the stock price. But the truth is that this is the same as a frog in a well judging the world based on the sky it can see.

Therefore, regardless of whether you make or lose money in the short term, if you want to survive in the market for a long time and invest long-term, you need to put one mindset in your head. It's about fighting as much as possible in places where the odds are in your favor, and avoiding fighting as much as possible in places where the odds are against you. This is why you look at macros to understand this probability, and you also look at the stock price that accurately reflects the current market sentiment, and even if you are very confident, you should avoid all-in investing.

You can lose even if you fight in a place where the odds are in your favor. This is because you haven't given the probability enough chance to manifest. So, if the odds are in your favor, you should increase the number of trials and lengthen the investment period. On the other hand, you can win even if you fight in a place where the odds are against you. But that's just because you were lucky. The odds are already low and they have already manifested, but you keep fighting? The odds of winning are even lower. It is a probabilistic way of thinking to quickly realize that you were lucky and leave the spot quickly.