That year, when to take you money-losing guide

Charlie Munger: If I knew where I would die, I would never go there#

I know you are anxious, so I will try to keep it simple.

Don’t borrow money to invest, don’t use leverage

You must be thinking, once I make a profit this time, I will unload the leverage. But from my observation, many people who increase their leverage during a bull market are very few who can safely unload it.

Keep enough living reserve funds

I proposed the "four types of money" in 2018 because I saw too many new friends putting all their money, especially the money they needed in the short term, into the market during the bull market. Being trapped affected their lives. Therefore, at the very least, you need to keep enough living reserve funds for a year or even longer. It would be even better if you could use insurance to cover other risks in life.

Either don’t believe it, or believe it early

I once wrote that a bull market is a "mass movement," and maybe now you understand what this means. Under this emotional frenzy, you can choose not to believe or participate, or you can believe early and participate early. But it is crucial to avoid not believing at first, and then being unable to resist rushing in when it is almost midnight at the ball...

Avoid increasing positions as prices rise

90% of new friends will start by buying 10,000, then buy 50,000 after a while, and then buy 500,000 at the end of the bull market... This kind of buying structure will make your overall cost very high, and you will buy very expensively. Once the market adjusts or turns bearish in the future, you will quickly incur losses.

Try not to compare

A bull market is a game of "comparison." Your stocks have risen, but you may not be happy. Because you may not have risen as much as your colleagues, or as much as the index, or as much as the stocks that definitely exist in a bull market that have increased tenfold... It’s better to make yourself a little happier. After all, you probably won’t envy a friend who won the lottery jackpot because you know you can’t do it. More importantly, the frustration brought by comparison may affect your mindset, making your actions more distorted.

Avoid frequent switching

This point is actually related to the previous one. Chasing hot stocks frequently is actually very difficult. From the time you see a certain sector performing well to the time you decide to chase it, the time when the price has risen the most may have already passed, and it is easy to find that your position has risen even more after you chase it, hitting you from both sides and causing your mindset to collapse. A better way is to "diversify" and hold multiple targets, because most new friends do not really "understand" the stocks, funds, and strategies they invest in, so diversification is always the best way to protect yourself.

Develop a trading plan

No one knows where the top of a bull market is (of course, in hindsight, someone will have guessed right).

Make your trading plan well. If the market overheats, execute it immediately when conditions are met. Don’t let the market's emotions lead you around.

Don’t come back shortly after selling

After selling, whether it continues to rise or temporarily falls, don’t come back. Investors always feel that they can catch short-term fluctuations, but this is one of the most difficult things in investing. Out of 100 people, 95 can easily end up like in point #6, slapping themselves back and forth, causing their mindset to collapse.

Don’t buy popular funds

In 2007, 2015, and 2021, popular funds and proportionally allocated funds were all because too many people bought them. When too many people buy, it must be that the stock market is too hot or that the investment direction of this fund is too expensive.

Don’t do what you don’t understand

At this time, this requirement may be too high, so I won’t explain it...

There is an old saying: there are old pilots and there are brave pilots, but there are no brave old pilots.

This simple money-losing guide above is like a flight checklist summarized from a plane crash full of blood and tears, and it condenses the experiences and lessons of many old pilots and brave pilots.

If you can avoid these, you may not be far from making money.

                 ——Excerpt from Meng Yan

In recent years, my experience of losing money, borrowing money to speculate in stocks, although I didn’t lose much, but from this experience, I realized that stock trading is not that easy. It’s not just about following the trend to make money; you need to study a lot of things. Before you have sufficient understanding, borrowing money to do this is quite dangerous. Secondly, it’s overestimating oneself, thinking that one can make money without having optimistically thought through this matter.

I came into contact with virtual currencies and tried my hand at buying several coins on the Gate exchange. They kept rising, so I increased my investment, and they kept rising. I even fantasized about getting rich while sleeping, but not long after, they started to plummet, and I panicked and began to liquidate, suffering heavy losses.

At the beginning of 2018, I watched my ETH fluctuate around 500 yuan, and in a fit of anger, I liquidated all my ETH.

Summary: The basic logic is that I don’t even know the cyclical nature; without understanding, blindly investing will inevitably lead to a big fall! ————————————

Whatever I buy, I lose. If I don’t understand it, forget it. I’m not the person for this path, so I’m out. ————————————

Starting in 2020, I began to dabble in funds. That year the market was good, rising all the way, thinking this is the legendary securities market, simply picking up money, loving it.

Then I borrowed 50,000 from my mom, adding my own 50,000 to invest. In July/August 2020, I welcomed a wave of bull market surges and made 20,000. I didn’t take profits in time, and later I neither made nor lost.

Later, in 2021, I made a series of operations as fierce as a tiger, and now after selling all profits, I still lost 20,000...

In October 2020, when Hong Kong stocks were hot for IPOs, I spent over a thousand to sign up for a class and took 20,000 to play with Hong Kong stocks.

The result was that I applied for IPOs 10 times and didn’t win once, and I spent over 500 Hong Kong dollars in fees.

The most ridiculous thing is that later I didn’t want to play anymore and wanted to transfer the money back to the mainland card. I found out that my account at [Huamei Bank] was automatically canceled because I hadn’t deposited money for a month, and I couldn’t reopen it... So, my 20,000 is still stuck in the Hong Kong stock account, unable to come out.

After more than two years of investment, I lost a total of 40,000. (I just graduated from my undergraduate degree a little over a year ago) Alas, making a family that is not wealthy even worse.

What I want to tell other friends is: investing is still very deep water. Money earned by luck will definitely be lost by skill.

Investment pitfalls: blindly following the trend, heavily investing, using leverage, and lacking stop-loss awareness.

Knowledge payment: impulsively signing up for courses, exaggerated publicity, and losses due to lack of practice.

Partnership risks: no contracts, financial opacity, and unsuitable partners.

Physical projects: inventory backlog, failed franchises, and high costs.

Lending issues: lending money to others and loans leading to debt.

Health lessons: ignoring health leads to high medical expenses.

Investment requires caution, do not blindly follow the trend, and maintain independent thinking.#

Investment risks: blindly following the trend, heavily investing, using leverage, and lacking stop-loss awareness.

Knowledge payment: impulsively signing up for courses, exaggerated publicity, and lack of practice.

Partnership management: lack of contracts, financial opacity, and unsuitable partners.

Physical projects: inventory backlog, failed franchises, and insufficient market research.

Lending issues: lending money to friends and severe consequences of loans.

Health issues: ignoring health leads to high medical expenses.

Summary: Investment requires caution, do not blindly follow the trend, and maintain independent thinking.

What are the main points of discussion?
Main points of discussion
System reform and human nature: emphasizes that after meeting basic needs, it is necessary to reform the system and eliminate brotherhood to cope with the rapid growth of ordinary people's desires.

Market adaptability: suggests not to blindly follow the trend, but to deeply understand new industries and avoid mindlessly pursuing data and traffic.

Cooperation and trust: emphasizes establishing a reasonable interest mechanism in cooperation to reduce antagonistic relationships and ensure mutual trust and consensus.

Can you give me a summary?
Summary
This article discusses common problems and lessons in entrepreneurship and investment, including blindly following trends, lack of market research, and unsuitable partners. It emphasizes the importance of system reform and suggests establishing reasonable interest mechanisms in cooperation to reduce trust crises. Finally, it reminds readers to maintain independent thinking when investing and avoid impulsive decisions.

Recommend several cases mentioned in the text
Recommended cases
Mini-game promotion plan: through learning short video production, although ultimately abandoned, but accumulated experience.

Essay franchise brand: exposure to the commercialization of education, trying various activities, although experiencing complaints, but gained valuable lessons.

Virtual currency investment: after initial profits, did not exit in time, ultimately suffered heavy losses, reminding investors to operate cautiously.

Draft a detailed summary.
Detailed summary
This article explores the common traps and lessons in the process of entrepreneurship and investment, emphasizing the importance of rational decision-making. First, the author points out the risks of blindly following trends and heavily investing, reminding readers to conduct sufficient market research when entering unfamiliar industries to avoid mindlessly pursuing traffic and data. Secondly, it emphasizes the importance of signing contracts in partnership management to ensure financial transparency and benefit sharing, reducing disputes caused by unsuitable partners.

In terms of knowledge payment, the author warns against the risks of impulsively signing up for courses and exaggerated publicity, suggesting consumers carefully discern the level of service providers when purchasing services. For physical projects, the article mentions cases of inventory backlog and failed franchises, emphasizing the potential problems of high upfront costs and insufficient market research.

Additionally, lending issues are also mentioned, reminding readers to be cautious when lending money to others to avoid financial difficulties. Finally, the author concludes that investment requires maintaining independent thinking and avoiding impulsive decisions to achieve more robust financial management and risk control.

What losses have you encountered in the investment process?
Investment loss experiences
Stock market investment: lacking experience during initial investment, blindly following colleagues' advice, leading to small losses, timely stop-loss to avoid greater losses.

Building materials industry: invested in the building materials industry for 8 years, burdened with 200,000 debts, forced to cut losses on three stores, suffering heavy losses.

Virtual currency investment: invested in air coins, lost 20 ETH, missed other investment opportunities, deep lessons learned.

Stocks and funds: multiple losses due to lack of stop-loss strategies, especially during market fluctuations, failing to adjust investment strategies in time.

Internet projects: eager for quick success, tried multiple projects but failed to see results, ultimately leading to total loss.

Precautions for lending money to friends#

Cautious lending: be prepared for the possibility of not being able to recover the money when lending, to avoid financial losses due to trust.

Clarify risks: when lending money to friends, understand the other party's repayment ability to avoid blind lending.

Avoid guarantees: try to avoid guaranteeing loans for friends to prevent financial impact due to their failure.

Maintain independent thinking: when lending money, do not be swayed by emotions, ensure rational decision-making.

What cases are mentioned in the text?
Recommended case characters
A certain teacher: once recommended the author to enter a certain company, resulting in the author suffering losses in part-time work.

Friends: during college, a friend recommended a part-time opportunity, ultimately leading to an unpleasant investment experience for the author.

Investors: a certain investor recommended unlisted virtual currencies, initially profiting but failing to exit in time, resulting in final losses.

Can you give me a summary?
Summary
This article discusses common traps and lessons in entrepreneurship and investment, emphasizing the importance of rational decision-making. The author shares personal experiences of losses in the stock market, building materials industry, virtual currency investment, and more, reminding readers to be cautious when lending money to friends, clarify risks, and maintain independent thinking. Additionally, the recommended characters in the text played significant roles in the author's investment journey but ultimately led to negative outcomes, emphasizing the need for caution when choosing partners and investment projects.

What difficulties have you encountered in business partnerships?
Difficulties encountered in business partnerships
Unsuitable partners: choosing partners who are either incompetent or not fully committed, leading to disagreements and decision-making difficulties.

Lack of financial transparency: during the partnership, the lack of transparent financial management creates trust crises and unfair profit distribution.

Troubles with friends and relatives: when partnering with friends or relatives, it becomes difficult to speak frankly due to emotional issues, leading to conflicts and compromises.

Insufficient market research: failing to conduct thorough market research before opening a store leads to poor location choices and operational difficulties.

What are the main points of discussion?
Main points
Rational decision-making: in investment and cooperation, maintain rationality, avoid emotional factors influencing judgment, especially when lending money and choosing partners.

Risk awareness: understand and accept the risks in investment and cooperation, prepare mentally for possible losses, and avoid blindly following trends.

Transparent communication: establish good communication mechanisms to ensure financial transparency and fair profit distribution, maintaining the stability of the partnership.

What successful and failed lessons have you learned from your entrepreneurial experiences during college?
Successful and failed lessons from entrepreneurial experiences during college
Successful lessons:

Market research: through thorough market research, successfully identified potential projects and achieved certain profits.

Team collaboration: collaborating with like-minded partners formed a complementary skill set, increasing the project's success rate.

Failed lessons:

Lack of experience: blindly investing without practical experience led to financial losses and wasted time.

Mistakes in choosing partners: collaborating with partners who were not well understood, overlooking their capabilities due to trust, ultimately leading to project failure.
Character cases

About retail stocks#

The value of stocks (2014.10.11). I have always believed that Buffett's standard is quite reliable; the value of a stock is actually the discounted future cash flow of a company.
3. How to establish a good mindset in the stock market (2015.2.27)
It actually has nothing to do with cultivation, as long as two conditions are met.
First, you have spent enough time in the stock market and experienced various storms.
Second, you have made enough money to cover your future losses.
With these two points, your mindset will naturally be like mine; you can't help it.
4. A person's head is like a computer (2015.2.28)
Each of our heads is actually a computer, and this computer has a unique program in the world (worldview, values, knowledge, experience, and the environment one is in determine this program). Whenever we need to make a choice or decision, we unconsciously input various parameters that we consider important into this program, which will categorize and filter them, and finally, this computer will give you the most beneficial instruction.
Everyone has this computer, but the model is different for everyone. Why do many classmates and colleagues around you have many friends, but only a few are close friends? Why are there thousands of men and women in the world, but you choose this one as your husband or wife? After graduating from college, you can pursue many professions, so why did you choose this one? Why are there so many stocks in the stock market, but you only choose these few? All of this is the result of this computer making decisions based on your parameters unconsciously. The simplest example is when asked what a husband loves about his wife and why he married her; the husband often stutters and doesn't know how to answer. Is it because he hasn't thought it through about such an important matter in life? No!
Because we are just executing the final decision of the computer, but we don't remember the hundreds of parameters we input into our subconscious at the beginning.
The program of this computer is constantly self-modifying as you grow, and as you age, facing complex problems, the parameters you input into the computer also change, and the results of the computer's calculations often carry more personal color (becoming more stubborn).
Why do some people find what is said in the Tang Dynasty very good, while others find it not good? Why do some people feel very in tune when talking to Uncle Gen? Even on Xueqiu, even if you think the most absurd and ridiculous person has many fans. In fact, it is just that their computer programs are similar. Different programs lead to different results. It is impossible to argue about the results and debate who is right or wrong. Both Palestine and Israel believe they are fighting for justice. The most difficult contradictions in the world are all due to different programs. It is ridiculous to want to change the results without changing the programs!
Reflection: I deeply feel the importance of the words of retail investor B, especially those close to me, as their behavior is a very stable computer (of course, in their eyes, am I also a stubborn and stable computer?).
4. The perspective of investment (2015.3.28).
I have always compared the human brain to a computer. The program of this computer differs due to each person's worldview, experience, and knowledge. When we encounter something, we unconsciously input various parameters into this computer, and finally, the program will output an instruction.
I entered the market at the end of 1990, and there is a saying in the stock market: "No matter who it is, no matter what method they use, and no matter how good their character is, the only purpose of entering the stock market is to make money." For a long time, I believed this was the truth.
In 1990, I invested 20,000 yuan in the stock market to make some pocket money. In the 2001 bull market, I made money to buy a car and a house. In the 2007 bull market, I made money to achieve so-called financial freedom. During this period, whether it was short-term speculation or so-called long-term investment, the purpose was to make money.
After leaving the stock market in 2007, I often thought about a question: Is money really that powerful? Even if we don't experience the collapse of the Soviet Union and the ruble turning into waste paper overnight, the dollar has depreciated by 87% over the past century. Currency may seem stable in the short term, but it is bound to depreciate in the long term. Current financial freedom does not guarantee long-term freedom. Until two years ago, when I felt it was time to enter the stock market again, my computer sent me the instruction: this time I want to earn stocks and earn enough zero-cost stocks.
These stocks must meet the following conditions:

Their assets do not depreciate over time but appreciate, becoming more valuable over time.
Their products are always needed, regardless of how the dynasty changes or how society develops.
They can achieve long-term stable growth through endogenous growth without needing further investment.
Their dividend rate must be high.
The above is my computer program and the parameters I input. The result is my choice.
Is my choice correct? I don't know. This result is based on the calculations of my current program, and I have already placed my bets according to the computer's instructions. One day when I find my program is wrong, and I modify my program, the new instructions will definitely be different.
Everyone's investment perspective is different, and the choices will be different. Everyone acts according to their instructions, and there is no right or wrong. Once you understand this, friends who invest in Moutai and banks should not be angry and curse the ChiNext.
When I hold enough zero-cost, non-bankrupt, non-equity-raising, sustainable dividend stocks, whether the stock market is a casino or unfair has nothing to do with me. I have sunk to the bottom of the sea, and the waves on the surface have nothing to do with me.
Reflection 2022/5/5: What assets do not depreciate over time (or even appreciate over time)?
First, we can exclude almost all manufacturing, agriculture, forestry, animal husbandry, fishery, banking, and insurance (paper currency will definitely depreciate).
The companies I can think of that never depreciate (or even become more valuable over time) are roughly of several types.
One is brands. The most well-known brands are in the liquor industry, such as Moutai, Wuliangye, Guojiao, and Jian Nan Chun. Our culture continues to extend, and these liquor brands never depreciate.
In addition, there are brands like Nongfu Spring that sells water, Zhang Xiaoqian that sells scissors, and Guangzhou Restaurant that sells mooncakes.
Two are mineral resources. Coal, oil, natural gas, copper, iron, gold, molybdenum, lithium, and rare earths; human demand for resources is endless, and as long as the remaining reserves are large enough, they can be considered almost never depreciating.
Three are certain unique flavors. Mainly concentrated in the food and beverage industry, such as Coca-Cola, Taoli Bread, Qiaqia Sunflower Seeds, and Anjing Meatballs. These products are not as expensive as liquor, but they have an eternal appeal to certain people (I am a loyal consumer of Taoli Bread and Qiaqia Sunflower Seeds), and this asset also never depreciates.
Four are certain exceptions: such as the elevator media network of Focus Media.
Reflections after reading Buffett's shareholder letter (2015.3.2).
I read Buffett's letter to shareholders and shared some thoughts.
In the short term, the stock market's fluctuations are always large, while the fluctuations of currency or bonds are small. This gives people the illusion that the stock market is riskier. But in fact, volatility does not equal risk. In the long run, society is developing, and the trend of the stock market is upward. Although currency does not show visible fluctuations, its long-term trend is certain to depreciate. Therefore, in the long run, investing in the stock market is actually less risky.
It is precisely because of the large short-term fluctuations in the stock market and the long-term upward trend. Therefore, the so-called stock market risk is actually caused by ourselves. How to say? If we fall into short-term speculation, the risk does not come from the listed companies themselves, but from our judgment accuracy regarding short-term stock price fluctuations.
Even when buying Berkshire's stock, it is also necessary to have a reasonable price.
Reflection: In 2021, I read one article every day and finally finished reading Buffett's letter to shareholders for the first time. Although I gained some insights, I felt that I did not grasp the essence of mergers and acquisitions, and I plan to read it again next year.
The difficulty of taking a car (2015.3.28)
In a person's life, you will find that you have bought many great stocks, but the ones that you have captured and that have brought you high returns are probably very few. As the saying goes, it is easy to get on the bus but difficult to get off; however, in the process of stock investment, it seems that it is easy to get on and off the bus, but sitting on the bus is very difficult. It is rare that we may not be able to compete with those old ladies who never get off the bus.
The reason is that most people invest not to sit on the bus but to get off. From the very beginning, they are always thinking about getting off, and then we find that at every stop, there are people getting off. No matter where the bus goes, there will always be a group of people thinking about getting off. Some people say that it is enough to make some money; some say that they have already broken even, so they should hurry up and run; some say that they have already made 50%, so they will wait for a drop before getting back on; some say that the weather is too bad, so it is better not to take the bus. In short, there are all kinds of reasons, and the psychology is always mocking those silly people who sit on the bus. It is hard to earn money, and they don’t know how to cash it out.
Those who get on the bus thinking about getting off often keep an eye on every trading opportunity, hoping to maximize their expected trading value. They are willing to repeatedly get on and off the bus, as if the money for buying tickets is a small investment and doesn’t matter. But if they print out their selling orders, many people may find that they have been working for the brokerage firm for a lifetime, and they are still working hard. But they seem to forget one thing: they have already paid for the tickets for that trip multiple times.
Rise and fall may just be the uphill and downhill roads during the journey. These roads may be different from the usual ones, but there is really no need to get on and off the bus for temporary rises and falls. Because if it is really a good journey, why care so much about the bumps along the way?
Those who can appreciate the beautiful scenery are always those who will sit on the bus. These people care about which bus to take when they get on. They won’t take a broken bus, nor will they take one with a poor driver, and they won’t take one with dangerous roads ahead. They will fully estimate all possible adverse conditions before getting on the bus and weigh whether it is worth it to take the bus. Instead of thinking about getting off at the slightest problem during the journey, this kind of reflexive response without thinking will not lead to great decisions. Always remember that the investment decisions made by those who frequently make investment decisions are usually mediocre investment decisions. I think the investment results will ultimately be half-hearted.
Thinking about it, getting on the bus is not for getting off, but to reach a certain destination. Getting off is just the moment of reaching the destination. Misunderstanding that getting on the bus is for getting off, and buying stocks is for selling stocks, easily leads to losing direction. The real reason we buy stocks is to let the objects we buy appreciate in value. There are two ways to appreciate value: one is value recovery, and the other is due to good business operations leading to value growth. This is the destination that investment should persist in, rather than judging by price and casually getting on and off the bus, just like a friend said, after a car flipped over once, those who survived learned to choose the right bus to sit on.
Three forms of stock market crashes (2015.8.11).
Based on my limited reading and understanding, I roughly summarize that there are three forms of stock market crashes. The first is when external factors affect the financial system and listed companies, leading to a stock market crash. For example, the financial crisis in 2007. Another is when internal factors lead to a stock market crash. This can be subdivided into two types: one is maliciously manipulated and shorted, such as the 1997 Asian financial storm. The other is purely because the stock itself has risen too much and too quickly, causing a crash. For example, the 1929 U.S. stock market crash and this time’s A-share crash.
The methods to rescue the market differ for these three types of crashes. In the first case, buying stocks to rescue the market is useless; it is necessary to rescue the relevant companies to restore their normal functions and restore the operation of the financial system. Once these efforts yield results, the stock market will naturally stabilize.
In the second case, rescuing the market is relatively straightforward because you know where the enemy is and who the opponent is. As long as your strength exceeds that of the opponent, you can take out real money to counterattack and drive them back.
In the third case, this situation is more complicated. The 1929 U.S. stock market crash reportedly occurred because there were rumors in the morning that the stock market was going to fall, and then the stock market really started to fall. Moreover, the more it fell, the more fierce it became, and it became uncontrollable. This was purely due to the market itself adjusting because of the previous excessive and rapid rise, which belongs to the market's own adjustment. In this case, should the government intervene? At that time, the U.S. government respected the market and did not intervene. As a result, the stock market crash affected consumption, which in turn affected enterprises, leading to a vicious cycle between the real economy and the capital market, causing the Great Depression in U.S. history.
I have read books introducing the financial history of the United States, and the 1929 stock market crash is a case study. In this situation, should the government intervene? The relevant regulatory authorities in the U.S. concluded from their experiences and lessons that the market should be rescued. Since then, although the U.S. stock market has experienced many crises, due to government intervention, it has never experienced such a long-term depression as in 1929.
Relying on financial statements (2015.9.30) Simply looking at financial statements for value investing in stocks usually leads to buying at the peak of the company's prosperity and selling at the low point of the company's prosperity.
Old man A and newcomer B (2015.8)
One is an old man who has experienced the ups and downs of the stock market for more than ten years. The other is a newcomer who has just entered the stock market and wants to emulate Buffett's value investing.
If both bought Moutai a few years ago, today their mindsets may be completely different.
A's experience: I finally found the right path and no longer fumble around, holding Moutai for long-term investment.
B's experience: I have basically figured out the valuation method of value investing. I want to find the second Moutai.
2; If an old stock investor has made a continuous profit of 40% every year for several years, he will become increasingly silent because he knows that in the following years, there will definitely be several years of very low or even negative growth waiting for him. Because Buffett's annualized return is there. If a new stock investor has made a continuous profit of 40% every year for several years, he may become increasingly arrogant, thinking that beating Buffett is not as difficult as imagined.
Reflection: I now find that my mindset is very much in line with that of the old man B.
Characteristics of stocks suitable for long-term holding (2016.1.6)
Any good stock suitable for long-term investment has a characteristic in terms of stock price: if you watch it every day, it will be half dead. Most of the time it fluctuates with the market, and there are many days when it is weaker than the market, with only a small portion of the time stronger than the market. Watching it gives you the feeling that this stock is not good. Forget it, and look at it again in a few years, and it has risen a lot.
This is not difficult to understand logically. You think, if a stock is suitable for long-term investment, if it rises every day, it will reach its target in a few days. Even if we calculate according to Buffett's annual return of 20%, if it rises 4% every day, it will reach its target in a week of trading. If it was strong before, it must be weak later. Otherwise, if it is strong all the time, its stock price must be overdrawn for the next few years, and it should run away, which means it is not suitable for long-term holding.
Long-term investment is not painful and does not require willpower (2016.6.22)
If you subconsciously believe that money is the most reliable, the stock market is just a casino, and stocks are just chips. In your assets, cash will be the norm, and you will look for opportunities to enter the stock market, buy low and sell high, make a profit, and then run away, waiting for the next opportunity. If you can’t wait for the opportunity, it doesn’t matter, because cash is the most reliable.
If you subconsciously feel that the assets of quality companies are the most reliable, cash will gradually be diluted into nothingness. In your assets, stocks will be the norm. When you have some money, you will always look for opportunities to buy quality stocks at low prices, turning cash into assets. As for whether the assets can run at a high point, you don’t care, because you believe that in the long run, assets are the most reliable.
These two attitudes determine your investment perspective. Those who say that holding stocks for the long term requires great willpower and is very painful, I think still have the mindset of the former.
For old friends, I only care about dividends (2017.1.18).
Chasing hot stocks, judging the trend of the market to make waves, summarizing how much money was made or lost each year, these things are already a thing of the past for me.
Investing in hot stocks or judging market trends to make waves is a process: investing a pile of funds to buy stocks, then throwing the stocks out at a higher price, turning back into a pile of cash. Then, looking for the next hot stock or waiting for another trend to form. We all know that no matter how good a company is, it has a ceiling, which means that a stock's price cannot rise to the sky, but if your judgment is accurate enough, you can achieve unlimited returns through continuous wave operations or rotating hot stocks. This is why people like to keep looking for hot stocks and judging waves.
But this kind of operation has several problems for me: First, as I get older, I am always in a tense state, which is too hard. Second, even if I have a lot of experience and the probability of being right in the previous judgments is quite high, every investment is a brand new beginning, and whether I can judge accurately next time is actually an unknown. This investment state, no matter what age you are, always feels like you are preparing to set off on the road, and the road ahead is very uncertain. This is not an ideal state for my later life.
Therefore, I hope that while I am still young, I can buy stocks that I believe can provide stable dividends for the long term at the right time. The number of shares I buy is the number I believe can allow me to live a good life based on conservative dividends. Then, as time goes by and my age increases, the dividends will gradually lower my buying price, in other words, I will gradually recover my investment. The bull and bear markets in the stock market can affect stock prices, but they will not affect company dividends. Therefore, for someone who cares about stock dividends rather than making a difference, the bull and bear markets in the stock market are not important. In the future, relying on dividends can lead to a leisurely life in old age, and a pile of low-cost stocks can ultimately be left as assets for future generations. Isn’t that nice?
As for how much Buffett earns each year, how much other bulls earn in the stock market, I don’t care at all. I don’t care whether I outperform or underperform the index each year. What I care about is how much the dividends are this year? When can I recover my investment? (Of course, I can sell some stocks to recover my investment, but I hope to recover my investment through the profits of the listed companies).
Reflection: A company can be understood and concluded after years of observation and understanding: whether it is our friend or not worth deepening the relationship. If it is our friend, there is no need to look at it carefully every year. When the annual report comes out, what I care about is just one thing: how much is the dividend this year?
Holding a few such company friends at a reasonable price means that you don’t have to care about bull or bear markets, you don’t have to care about whether you can outperform the index, you don’t have to care about who the hot stocks are. Every year, holding enough cash dividends, you can live a peaceful and leisurely life.
Cherish the opportunity to buy quality companies at low prices (2017.7.1)
In any investment market, it is abnormal to find obvious bargains everywhere after entering; it must be short-term. A normal market should only allow those with unique insight to buy bargains. Buffett wanted to buy Walmart but waited for years and never got a cheap price. In the future, this may also be the norm in the A-share market. It is very difficult to see opportunities for irrational large declines in the short term.
My conclusion is that if you are fortunate enough to buy quality blue chips at low prices, please hold on and cherish the opportunity that history has given you. If you are buying large blue-chip stocks later, please be a patient person; this is the bottom area. Fluctuations and shocks are not risks; they are just the norm in the stock market. Once you think you are trying to catch fluctuations, fluctuations will become risks.
Refuting Qiu Guolu (2017.7.19)
A few days ago, I saw Qiu Guolu say: Buying a stock and waiting for it to rise eight times is not as easy as buying three stocks that rise once in sequence.
This logic seems correct, but it actually hides many concepts that contradict investment.
First, according to my experience, the biggest enemy of investment is: thinking about how long it will take to earn several times when buying. This kind of thinking is not acceptable.
This will lead investment into the concept of efficiency, that is, the shorter the time for returns, the better the investment. This will lead investment astray. To do this, you must correctly judge things that cannot be judged. According to this logic, you can also conclude: buying a stock that doubles is not as easy as buying three stocks that rise by 26% in sequence. Buying a stock that rises by 26% is not as easy as buying three stocks that rise by 8% in sequence. The extreme is: earning 1% in a day is easy, and you can earn 365% in a year.
Of course, as a fund manager, Qiu Guolu has several excellent fund managers under him. He has the conditions to study many industries and companies. In addition, the standard for whether a fund is good or not is also the short-term appreciation speed. It is natural for him to have such experience and pursuit. However, for ordinary investors like us, such ideas may not be suitable.
Reflection: Qiu Guolu's words are simply poison for ordinary individual investors! Because you have to find continuously rising stocks, it is a real fantasy.
The increase in cashing out has increased stock market volatility (2017.10.4)
There are two types of people who buy blue-chip white horse stocks (actually there are countless types). One type is long-term investors based on value. The other type is short-term investors who speculate on them as "value" themes. Obviously, the latter has recently withdrawn after making a certain profit.
The price of stocks fluctuates every day, and most people always feel that as long as assets exist in the form of stocks, they are always fluctuating and unstable, and there is no certainty about who ultimately owns the money. They stare at their accounts every day, thinking that if their account increases by 100,000, they can change from a Toyota to a BMW. If they decrease by a few thousand today, they think: a wheel is missing. Even if it decreases by 100, they will also think: two days of vegetable money is gone. Therefore, every once in a while, when they make some money, they have to cash out to confirm the ownership of the assets, which seems to confirm the ownership of the assets and makes them feel secure. There is a very vivid term: cashing out for peace of mind.
Cashing out for peace of mind mostly lasts only a short time. It seems that as long as they confirm the ownership of the property, they will feel uneasy again. When the stock market falls, they are eager to bottom fish. When the stock market rises, they suddenly feel that cash is particularly annoying, and they would rather change to any stock than hold cash.
The first type of people increases the water level slowly. The second type of people increases volatility. This is the stock market.
Blue-chip white horse stocks are adjusting at the end of the half-year, which is normal. When the adjustment ends, those who should cash out will cash out, and blue-chip white horse stocks will still be the main theme, still on the road to recovery.
Reflection: Stop-loss and cutting losses also exacerbate volatility, while volatility amplifies stock returns. Volatility is an important factor for stocks to exceed bond returns.
Don’t be hard on yourself (2017.10.10)
If a few years ago someone told you that jade and redwood have risen dozens or hundreds of times over the years, you would be very surprised and then do whatever you wanted. Because you know you are not in that line, that money has nothing to do with you.
If someone told you that certain stocks have risen several times recently, you might quickly open the stock chart and regret not discovering it earlier. What is particularly unbearable is that it is a real estate stock, and you hesitated to buy it.
Then, in the dead of night, you would lie in bed, tossing and turning, calculating how much your assets would have increased if you had bought that stock. Then you would endure and endure until you couldn’t stand it anymore and rushed in.
In fact, you may have an illusion that once you enter the stock market, you have entered the investment industry, and all stocks in the stock market are money that you should earn. If you haven’t earned it, it means you are not capable enough. Haha, it’s good to have high standards for yourself, but don’t be hard on yourself, as that is not in line with physiological hygiene.
The same real estate stock, a few months ago, was valued at 3 yuan. Now it is valued at 30 yuan. It is said that the valuation system has changed. In fact, it is just a change in thinking; it is a question of whether it is a bull market or a bear market. PetroChina’s stock price was 48 yuan at the time, and the reasons were very sufficient. First, Chinese cars were starting to enter families, and future demand for gasoline was huge. There are currently less than 100 million cars, and if there are two or three hundred million cars in the future, how much will the oil price be? It is reasonable and proper for the oil price to reach 200 dollars next year. (The urbanization rate is only 57% now, and in the future, it will reach 80% in developed countries, and housing prices will rise several times.) Second, how many billion barrels of proven underground reserves does PetroChina have? Multiply that by 200 dollars per barrel, and what is its value? (The previous land reserves were very cheap and appreciated greatly.) Conclusion: 48 yuan per share is not expensive. This is the bull market thinking. The same PetroChina, now in bear market thinking: there were less than 100 million cars in China before, and the oil price was 150 dollars per barrel. Now there are 300 million cars in China, and the oil price has not only not risen to 200 but has dropped to 50 dollars per barrel, plus shale gas, plus the future electric vehicles being the mainstream. Now PetroChina is 5 Hong Kong dollars per share. Although it is not expensive, why buy it?
Most stocks have this problem. For example, the old liquor, a 350-jin jar of old wine from 1963 was auctioned for more than 12 million. When we calculate the assets of the old liquor, how much do we calculate for the 50,000 tons of old wine inventory? Of course, it is based on the manufacturing cost, which is a few hundred yuan per jar. How much is the value of the 1619 old liquor pool? Of course, it is 0 yuan; it has long been fully depreciated. Will the valuation system for liquor change in two years? That would not be a good thing!
Reflection: The example of PetroChina's valuation is very good! Moreover, PetroChina's reserves have indeed long been ignored! Now, however, the rising Shaanxi Coal and China Shenhua are starting to be taken seriously.
Stock market V is an idiot in other industries (2017.9.10)
As people age, every year, a large number of new stock investors enter the market. If you have been in the stock market for a while and have experienced several bull and bear markets, you will have a more mature and profound understanding of the stock market and stocks. On this basis, if you have bought some good stocks over the years and made some money, you can consider yourself a veteran in the stock market.
With this identity facing many new stock investors, facing their confusion and helplessness, if you are willing to answer their naive questions, using your understanding of investment and experience to enlighten their investment, along with your profitable performance, it is not difficult to win fans.
If you are not very socially active and spend a lot of time in investment-related forums online, over time, you may feel that you are wiser than most people. If you are not old enough, you may unconsciously think you can set an example in all aspects.
In fact, there are 360 industries in society, and each industry has its champions. In the investment field, you may find that the people you consider naive and ridiculous may be champions in their respective fields. They could be excellent dentists or experts in sound systems. Once you enter their field, you immediately become ignorant, and your roles will switch.
Unfortunately, from the statements of some V's on Xueqiu, you can be sure that they have not realized this.
Reflection: This point is very obvious in many V's, including myself. Retail investor B can clearly recognize everyone's limitations, which is admirable.
The surface and the whole of things (2017.10.21)
I will say a truth: the Chinese stock market is good in the long run, and short-term fluctuations are inevitable.
This statement is true because it does not set how long the long term is and how short the short term is. It conforms to the long-term development law of humanity and the short-term form of the market.
Investment is a simple matter: you see, the U.S. stock market has been around for a century, and the index has risen from 40 points in 1896 to 23,000 points today, how many times has it increased? Just buy a good stock and hold it for the long term to make big money.
This is just the surface of things.
Investment is also a very difficult thing: 93% of the world's top 500 companies a hundred years ago have disappeared today. In other words, if you simply held good stocks a hundred years ago, you would not have made much money; instead, you would have a 93% probability of disappearing.
This is the whole of things.
There are countless such relationships between surface and whole in investment, and the more you understand, the higher your investment awareness will be.
Reflection: High returns require long-term holding, but the vast majority of companies will decline, making them not worth holding for the long term. Therefore, there are only two simple ways.
Find companies that are suitable for long-term holding, have strong competitive advantages, and can even operate sustainably.
Invest in index funds and let the index win over time.
There is no need to buy too many value investment books (2018.1.3)
Buffett has never written a book; his philosophy is all in the letter he sends to shareholders every year. To sum it all up, it boils down to one sentence: buying stocks is buying companies.
Duan Yongping is a successful practitioner of this philosophy. In recent years, he has had many insights about investing, which are interpretations of Buffett's investment philosophy.
If you want to become a value investor and establish the correct value investment philosophy, you only need to carefully understand and ponder the thoughts of these two people. There is no need to buy many books on value investment philosophy on the market; either they are repetitive or they distort the truth. Those books that claim to have earned several times over the years are just collecting your IQ tax.
The important thing is how we can turn knowledge into our own understanding.
Reflection (2022.5.23): I have printed and read Buffett's shareholder letters and Q&A from the shareholder meetings, and I have also printed Duan Yongping's collection. For other books, I plan to sell most of the investment books on Xianyu.
Repeating the old tune of "value investment" (2018.1.8)
The core and essence of value investing can be summed up in one sentence: "Buying stocks is buying companies." These eight words are easy to understand, and most people think they understand their meaning at a glance. However, based on my observations over the years, very few people truly understand it.
Buffett looks at financial statements every day, which shows that finance is important, but a professional accountant does not necessarily become an investment expert.
Whether you understand "buying stocks is buying companies" determines whether you can correctly face the fluctuations in a company's performance and stock market prices after buying a company at a certain price.
I will give an example. A few years ago, I met a friend on the Dongfang Wealth Laojiao forum when Laojiao was around 20 yuan. He often posted content basically saying that Laojiao has a good business, high gross profit, cash flow, no debt, and that during bad market conditions, inventory does not depreciate, etc. He then anticipated that Laojiao's performance could support a stock price of 50 yuan by the end of 2017. It can be seen that he actually knew what kind of company to buy and at what price to buy it. However, when Laojiao's stock price approached 30 yuan, he suddenly posted that he wanted to sell Laojiao, and his reason was simple: the stock price breaking through 30 yuan was too early, and the performance would not catch up so quickly. Combined with the K-line chart, 30 yuan was repeatedly a strong resistance. He decided to sell first and wait for the stock price to return before buying back at a lower price. Haha, I can still check my chat records with him, and I roughly said: Your strength is your intelligence, but your weakness is that you are too smart. He never posted again on the Laojiao forum.
This is a typical case of not truly understanding "buying stocks is buying companies." Buffett once gave a similar example: If you own a restaurant worth one million, and one day someone comes to your office and knocks on the door to offer you 500,000 to buy the restaurant, you definitely wouldn’t sell. The next day, if someone comes to offer you 400,000, you certainly wouldn’t sell either. If that person says, "If you don’t sell to me today for 400,000, tomorrow someone will come to buy it for 300,000," you would definitely kick him out with a stick. But in the stock market, such things happen every day.
Reflection: I once made the same mistake when Laojiao broke through 100 yuan, thinking it must be pulled back repeatedly, resulting in me losing some shares of Laojiao and becoming a laughingstock.
Why I don’t care much about the bull or bear markets and short-term performance of companies (2018.2.18)
If I had seen someone say this a few years ago, I would have been unable to understand it and would have concluded that he was just trying to appear different, that is, showing off. Looking back now, that was because the dimension I was in determined my perspective on the issue. If you don’t understand what I’m saying now, I hope you can take a closer look at how I think. If I have blind spots, I hope you can point them out for discussion.
Currently, Luzhou Laojiao is still my main holding. I estimate that among the retail investors holding Laojiao on Xueqiu, I should have a relatively large number of shares. However, in recent years, I have hardly spoken about Laojiao and rarely discussed it.
Why? Because to be honest, I can’t come up with anything new to say. The most concerning thing for everyone is the growth rate of Laojiao in 2019 (which directly relates to the strength of Laojiao's stock price recently)?
I don’t know.
By 2020, how much sales revenue and profit can Laojiao achieve (which relates to Laojiao's long-term stock price trend)?
I don’t know either.
Of course, I pay attention to all the information about Laojiao (market, sales, progress in East China and South China, etc.), but this information is fragmented and difficult to quantify, so I’m too lazy to write it.
If investing, if you don’t care about the bull or bear markets and the short-term performance of companies, what do you care about?
This involves the dimension each person is in. If you are in a dimension of holding stocks for three to five years, the bull or bear markets and the short-term performance of companies are the primary concerns of investment.
For me, the investment perspective of "buying stocks is buying a part of the company" has increasingly penetrated my heart. Another important point is that if the average return rate of the assets you hold is far higher than the average return rate of society (which is 7% in the U.S.), then the longer you hold, the greater the returns your assets will bring you. I am determined to hold stocks for the long term.
Once these two points become the foundation of my investment, I will unconsciously shift my focus to the return on equity for long-term shareholders. Once you start to value the return on equity for shareholders, you will find that first: the bull or bear markets have little impact on this indicator. Second: the ups and downs of performance, even if it declines a little, will also have little impact on this indicator. For example, if a company had a performance of 2 billion last year, and this year’s growth rate is 10%, it will be 2.2 billion; if it grows by 20%, it will be 2.4 billion; if it declines by 10%, it will be 1.8 billion. These three sets of numbers are very normal for a long-term operating company, and the impact of these three sets of numbers on the long-term return on equity for a company is not significant. However, these three sets of numbers are used as the basis for short-term valuation in the stock market, which has a huge impact on short-term stock prices.
At this point, there is another important issue that determines your dimension: the cost of holding stocks. If your holding cost is far above the current net asset value, even if a company has an excellent return on net assets, the actual return on equity you receive will be very mediocre. If your holding cost is far below the net asset value, then your actual return will be higher. For the same stock, different holding costs lead to different focuses. Taking Moutai as an example, we know that a few people on Xueqiu who hold Moutai at a very low cost rarely speak; they only focus on major events that can affect Moutai's long-term development, while investors who bought at a higher price in recent years will be very concerned about short-term indicators, as the growth rate means how much difference they can make. For long-term holders, the company's growth rate means how close their holding cost is to the net asset value.
Finally, your understanding of the business of the company you invest in and your understanding of the company's assets (the difference between a factory and two pieces of equipment of Lao Gan Ma and Lao Gan Zhai is the same, but the value created for shareholders is far different) determines what stocks you buy.
Reflection: Firmly holding a part of a high ROE company with a relatively low holding cost (preferably close to net asset value) means you don’t have to worry about the bull or bear markets and the growth rate of the company.