The Common Myth: Find a "Good Strategy" Before You Start Investing
In personal finance forums, the most common question pattern goes something like this: "I have NT$100,000 to invest. What should I do?" The replies flood in with various strategies—ETFs, passive income, value investing, real estate. This way of asking carries a hidden assumption: that there exists a "correct" strategy, and once you find it, wealth will follow naturally.
Psychological research shows that humans are hardwired to seek certainty before taking action, a instinct tied to our evolutionary need to "confirm safety." Yet the complexity of financial markets lies in the fact that they are dynamic systems—no single strategy works across all market conditions. According to behavioral finance research published in the Journal of Finance, the frequency with which individual investors switch strategies during market volatility shows a significant negative correlation with their final returns: the more they switch, the more they lose.
What makes this myth dangerous is that it focuses your attention on "choosing the right tool" rather than "building the right system." While you spend energy comparing the merits of Strategy A versus Strategy B, you overlook something far more important: without a framework for deciding when to act and when to wait, even the best strategy will collapse under the weight of human weakness.
The Logical Flaw: A Perfect Strategy Simply Doesn't Exist
The core problem with the myth above is that the word "strategy" has been overly mythologized. In real-world investing, a so-called good strategy is never static. Take growth investing, which performed exceptionally well over the past decade—it suffered major drawdowns in the 2022 rate-hiking environment. Meanwhile, value investing, which many experts had written off, rose against the trend in certain cyclical sectors.
This phenomenon reveals a basic truth: a strategy's effectiveness is highly dependent on the market environment, and the market environment itself is unpredictable. You might pick the "right" strategy in a given period, but when the market regime shifts, that same strategy can immediately become a drag on your performance. Chasing the so-called best strategy is, at its core, using past data to predict the future—statisticians call this "rearview-mirror investing."
An even more fundamental problem is this: even if a strategy existed that perfectly fit all historical market conditions, ordinary people couldn't execute it consistently. Because every strategy will inevitably go through periods where it "doesn't feel right"—paper losses, stagnation, no visible progress. Without a psychological framework established in advance, most people will give up at the worst possible moment, rendering a "perfect strategy" meaningless.
How I Actually Think About It: Framework Over Strategy
When I face this question, my approach is to shift the focus from "which strategy to choose" to "what system to build." This shift may seem minor, but it represents a qualitative leap in investment thinking. A framework doesn't tell you "buy now or sell now." It defines what your decision-making process looks like when facing uncertainty.
Specifically, I ask myself three questions instead of "which strategy is better." First, if my judgment turns out wrong, how much can I afford to lose? This question shifts the focus from "how to win" to "how not to lose," which is the foundation of risk management. Second, how much time do I need to verify the effectiveness of this strategy? This prevents you from abandoning it too early or over-committing because of short-term volatility. Third, what is the basis of my judgment? Does this basis still hold up when the market environment changes? This question helps you distinguish between "genuine investment logic" and "psychological projection born from herd behavior."
Once you've thought through these questions, you'll notice something interesting: many strategies are actually usable. The key is whether you can stick with one during its underperforming periods. Most people fail not because the strategy itself is flawed, but because they drift away from their original logical framework during execution. They see other methods working and want to switch, eventually ending up in a trap of "tried everything but accumulated nothing."
Building the Right Framework: Decision Systems, Risk Tolerance, Information Processing
To systematize your framework, you can build it along three dimensions. The first is the decision system—the "rules for entry and exit." These rules don't need to be complicated, but they must be specific. "Specific" means the trigger conditions must be measurable: not "sell when it drops too much" but "re-evaluate when paper losses exceed 20%." With clear rules, you have a reference point during emotional turbulence, rather than letting momentary feelings dictate your actions.
The second dimension is setting your risk tolerance boundary. This boundary isn't just financial—it's more importantly psychological. Some people can stomach a 50% paper loss but can't help chasing when they see others making money. Others set strict stop-loss points but hesitate every time they need to execute them. Understanding your psychological boundary is more important than setting a numerical risk control. A useful exercise: test yourself with "hypothetical scenarios." If this investment dropped 30% tomorrow, what would I do? That answer often reveals your true risk tolerance better than any theory.
The third dimension is your information processing workflow. In the digital age, investment information is too easy to access—and that becomes a source of decision interference. Building a framework means deciding what you believe, what you don't, and how to verify the credibility of information. Ask yourself: What is the source of this information? What is the publisher's stake or bias? What market environment produced this view? These three questions can filter out most of the market noise.
In summary, when you shift your focus from "finding a good strategy" to "building a good framework," you'll find that your controllability in investing improves. A framework won't make every judgment correct, but it ensures that every judgment you make is based on consistent logic—not on momentary emotional swings or market panic. For someone sitting on capital but unsure where to begin, this may be more valuable than any investment advice out there.
"What matters isn't what decision you made, but whether you have a system for making decisions." —This line comes from The Art of Thinking, and it applies equally to investing. A framework won't make you rich overnight, but it will ensure that you don't walk away halfway through your wealth-building journey simply because of your own mindset.