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, 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 funds" 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 has even 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. In this emotional carnival, you can choose not to believe or participate, or you can believe early and participate early. But be careful not to start by not believing, and then can't help but rush in when it's 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 period of rise, and buy 500,000 at the end of the bull market... This kind of buying structure will make your overall cost very high, buying at a very expensive price. 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 stock has risen, but you may not be happy. Because you may not have risen as much as your colleagues, you may not have risen as much as the index, and you may not have risen as much as the tenfold stocks that must exist in a bull market... It's better to make yourself a little happier, after all, you probably won't envy a friend who won the lottery 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 spots frequently is actually very difficult. From the time you see a certain sector rising well to the time you decide to chase in, the time when the rise is the largest may have already passed, and it is easy to chase in and find that your position has risen even more, slapping your face on both sides, causing your mindset to collapse. A better way is to "diversify" and hold multiple targets, because most new friends can't really be said to "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 guess correctly).
Make your trading plan well. If the market is overheated, execute it immediately when the conditions are met. Don't let the market's emotions lead you.
- 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 actually one of the most difficult things in investing. Out of 100 people, 95 can easily be like #6, slapping their faces 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...
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 of losing money experiences, borrowing money to speculate in stocks, although I didn't lose much, I realized from this experience that stock trading is not that easy, and it is not something that can make money by following the trend. It requires a lot of research, and before understanding it fully, borrowing money to do this is quite dangerous. Secondly, it is overestimating oneself, thinking that one can make money without considering the optimistic side of this matter.
I came into contact with virtual currency and tried buying several coins on the Gate exchange, which kept rising, and then I increased my investment, and it kept rising. I even fantasized about getting rich while sleeping, but not long after, it started to plummet, and I panicked and began to liquidate, suffering a blood loss.
In early 2018, watching my ETH fluctuate around 500 yuan, I angrily liquidated all my ETH.
Summary: Basic logic, not knowing the cycle; lacking cognition, blindly investing, will inevitably lead to a big fall! ————————————
Whatever you buy will lose value, buying what you don't understand, forget it, this is not the path for you, I'm out. ————————————
I started touching funds in 2020, and that year the market was good, rising all the way, thinking this is the legendary securities market, simply picking up money, loved it.
Then I borrowed 50,000 from my mom, added my own 50,000, and invested it. In July/August 2020, I welcomed a wave of bull market surge and made 20,000. I didn't take profits in time, and later neither gained nor lost.
Later, in 2021, I made a series of operations as fierce as a tiger, and now after throwing away all profits, I still lost 20,000...
In October 2020, when Hong Kong stocks were hot for new listings, 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 participated in 10 new listings and didn't win a single one, and I probably spent over 500 Hong Kong dollars in handling fees.
The most outrageous thing is that later I didn't want to play anymore and wanted to transfer the money back to the mainland card, but I found that my account at [Huamei Bank] had been 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 undergraduate studies a little over a year ago) Alas, making an already not wealthy family even worse.
What I want to tell other friends is: Investment is still very deep. Money earned by luck will definitely be lost by skill.
Investment pitfalls: blindly following trends, 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.
Entity projects: inventory backlog, failed franchises, and high costs.
Lending issues: lending money to others and loans leading to debt.
Health lessons: neglecting health leads to high medical expenses.
Investment requires caution, do not blindly follow trends, and maintain independent thinking.#
Investment risks: blindly following trends, 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.
Entity projects: inventory backlog, failed franchises, and insufficient market research.
Lending issues: lending money to friends and serious consequences of loans.
Health issues: neglecting health leads to high medical expenses.
Summary: Investment requires caution, do not blindly follow trends, and maintain independent thinking.
What are the main points of the discussion?
Main points discussion
System reform and human nature: Emphasizes that after meeting basic needs, system reform must be carried out to eliminate brotherhood to cope with the rapid growth of ordinary people's desires.
Market adaptability: Suggests not to blindly follow trends, but to deeply understand new industries to avoid mindlessly pursuing data and traffic.
Cooperation and trust: Emphasizes establishing a reasonable interest mechanism in cooperation to reduce hostile 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.
Recommended cases from the text
Recommended cases
Mini-game promotion plan: Through learning short video production, although ultimately abandoned, valuable experience was accumulated.
Essay franchise brand: Engaged in educational commercialization, tried various activities, although experienced complaints, valuable lessons were gained.
Virtual currency investment: After initial profits, failing to exit in time led to heavy losses, reminding investors to operate cautiously.
Draft a detailed summary.
Detailed summary
This article explores 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 thorough 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 evaluate the level of service providers when purchasing services. For entity projects, the article mentions cases of inventory backlog and failed franchises, emphasizing the potential issues 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 stable financial management and risk control.
What losses have you encountered in the investment process?
Investment loss experiences
Stock market investment: Lacked experience during initial investment, blindly followed colleagues' advice, leading to small losses, timely stop-loss avoided greater losses.
Building materials industry: Invested in the building materials industry for 8 years, burdened with 200,000 debts, forced to sell three stores, suffering heavy losses.
Virtual currency investment: Invested in air coins, lost 20 ETH, missed other investment opportunities, deeply regretted.
Stocks and funds: Suffered losses multiple times due to lack of stop-loss strategies, especially during market fluctuations, failing to adjust investment strategies in time.
Internet projects: Eager for success, attempted multiple projects but failed to yield results, ultimately leading to total loss.
What are the precautions mentioned by the author when lending money to friends?
Precautions for lending money to friends
Cautious lending: Be prepared for the possibility of not getting the money back when lending, to avoid financial loss due to trust.
Clarify risks: When lending money to friends, understand their repayment ability to avoid blind lending.
Avoid guarantees: Try to avoid guaranteeing loans for friends to prevent personal financial impact due to their failure.
Maintain independent thinking: When lending money, do not be swayed by emotions, ensure rational decision-making.
What are the recommended case figures mentioned in the text?
Recommended case figures
A certain teacher: Once recommended the author to join 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 the author to an unpleasant investment experience.
Investors: An investor recommended an unlisted virtual currency, 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 internet projects, reminding readers to be cautious when lending money to friends, clarify risks, and maintain independent thinking. Additionally, the recommended figures in the text highlight the importance of careful consideration when choosing partners and investment projects.
What difficulties have you encountered in business cooperation?
Difficulties encountered in business cooperation
Unsuitable partners: Choosing partners who are insufficiently capable or not fully committed, leading to disagreements and decision-making difficulties.
Lack of financial transparency: During the partnership, the lack of transparent financial management causes trust crises and unfair profit distribution.
Troubles with friends and relatives: When partnering with friends or relatives, it is 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 the discussion?
Main points
Rational decision-making: In investment and cooperation, one must remain rational and avoid emotional factors influencing judgment, especially when lending money and choosing partners.
Risk awareness: Understand and accept the risks in investment and cooperation, prepare psychologically for potential losses, and avoid blindly following trends.
Transparent communication: Establish a good communication mechanism to ensure financial transparency and fair profit distribution, maintaining the stability of the partnership.
What successes and failures have you learned from your entrepreneurial experiences during college?
Successes and failures in entrepreneurial experiences during college
Successful lessons:
Market research: Through thorough market research, successfully identified promising projects and achieved certain profits.
Team collaboration: Collaborated with like-minded partners, forming complementary skill sets that increased the project's success rate.
Failure lessons:
Lack of experience: Blindly investing without practical experience led to financial losses and wasted time.
Mistakes in partner selection: Collaborating with partners who were not well understood, ignoring their capabilities due to trust, ultimately leading to project failure.
About Retail Investors#
The value of stocks (2014.10.11). I have always believed that Buffett's standard is quite reliable; the value of a stock is essentially the discounted future cash flows 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 ups and downs.
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 (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 think are important, and this program will categorize and filter them, ultimately giving you the most favorable instruction.
Everyone has this computer, but the models are different. Why do many classmates and colleagues surround you, yet only a few are your good friends? Why do so many men and women in the world, yet you chose this one as your husband or wife? After graduating from college, you can pursue many careers, but why did you end up in this one? Why do you choose these few stocks in the stock market? All of this is determined by your computer's parameters, which make decisions unconsciously. The simplest example is when you ask a husband why he loves his wife and why he married her; he often stutters and doesn't know how to answer. Is it because he hasn't thought it through about such a significant matter in life? No!
Because we are just executing the final decision of the computer without remembering the hundreds of parameters that were input into our subconscious.
This computer's program constantly modifies itself as you grow, and as you age, facing complex issues, 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 think it is not good? Why do some people feel they have a good rapport with Uncle Gen? Even on Xueqiu, even if you think the most absurd and laughable person has many fans, it is because their computer programs are close. Different programs lead to different results. It is impossible to get entangled in the results, debate, and argue about 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. Isn't it ridiculous to want to change the results without changing the program?
Can programs be changed? The program is formed bit by bit, subtly integrated into the blood as a person grows. How easy is it for outsiders to change?
Afterthought: I deeply feel the importance of this statement from retail investor B, especially regarding the behavior of close people, as they are like 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 the program will output an instruction after processing.
I entered the market at the end of 1990, and there is a saying in the stock market: "No matter who you are, no matter what method you use, no matter how good your 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. During the bull market in 2001, I made money to buy a car and a house. During the bull market in 2007, I made money to achieve so-called financial freedom. During this period, whether it was short-term speculation or so-called long-term investment, my purpose was to make money.
After leaving the stock market in 2007, I often pondered a question: Is money really powerful? Even if we don't encounter the situation where the Soviet Union collapses and the ruble becomes worthless overnight, the dollar has depreciated by 87% over the past century in the United States. Money appears 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 instructed me: 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 with time, becoming more valuable the longer they exist.
- Their products are needed regardless of how the dynasty changes or how society develops.
- They can achieve long-term stable development without needing further investment.
- Their dividend rate must be high.
The above are the parameters of my computer program. The result is my choice.
Is my choice correct? I don't know. This result is calculated based on my existing program, and I have placed my bets according to the computer's instructions. One day when I find my program is wrong, and when I modify my program, the new instructions will definitely be different.
Everyone's investment perspective is different, and choices are different. Everyone acts according to their own instructions, and there is no right or wrong. Understanding this principle, friends who invest in Moutai and banks should not be angry and curse the ChiNext.
When I hold enough zero-cost stocks that won't go bankrupt and don't need to raise funds, and can sustainably pay dividends, whether the stock market is like 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.
Afterthought 2022/5/5: What assets do not depreciate over time (even through changes in dynasties)?
First, we can almost exclude all manufacturing, agriculture, forestry, animal husbandry, fishing, banking, and insurance (paper currency must depreciate).
The companies I can think of that never depreciate (or even become more valuable over time) are roughly a few categories.
One is the brand. The most well-known brands are liquor brands, such as Moutai, Wuliangye, Guojiao, and Jian'nanchun. 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. 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, 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 a portion of 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 feelings. - In the short term, stock market 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 develops, and the stock market's trend is upward. Although currency appears stable without visible fluctuations, the long-term trend is definitely depreciation. Therefore, from a long-term perspective, 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 should be at a reasonable price.
Afterthought: 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. 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 truly bring you high returns are probably very few. As the saying goes, getting on the bus is easy, but getting off is difficult. However, in the process of stock investment, it seems that it is not like this; getting on the bus is easy, getting off is also easy, but sitting on the bus is very difficult. It is rare that we may not be able to compare 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 think about getting off, and then we find that at every stop, there are people getting off. No matter where the bus goes, there are always people thinking about getting off. Some people say that they should take their profits when they see good returns; some say they have already broken even, so they should hurry and run; some say they have already made 50%, so they will wait for a drop before getting back on; some say 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 always mocks those silly people who sit on the bus. After all, it is difficult to earn money, and they do not know how to cash out.
Those who get on the bus thinking about getting off often keep a close eye on every trading opportunity, hoping to maximize their expected trading value. They are willing to repeatedly get on and off, as if the money for buying tickets is a small investment, and it doesn't matter. But if you print out your selling order, many people may find that they have been working for the brokerage firm all their lives, and they are still very diligent. But it seems they forget one thing: they have already paid for that trip multiple times.
The rise and fall are likely just the uphill and downhill roads during the journey. These roads may be different from ordinary roads, but there is really no need to get on and off just because of temporary fluctuations. Because if it is indeed a good journey, why care so much about the bumps along the way?
Those who can appreciate the beautiful scenery are always those who can sit on the bus. These people care about which bus to take when they get on. They won't take a very broken bus, nor will they take one with a very poor driver, nor will they take one with dangerous roads ahead. They will fully estimate all the possible adverse conditions before getting on the bus and weigh whether it is worth taking the bus. They won't react impulsively during the journey, as this kind of direct reflex without thinking will not lead to great decisions. Always remember that the investment decisions made by people 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 to get off, but to reach a certain destination. Getting off is just the moment you arrive at the destination. Misunderstanding getting on the bus as getting off, and buying stocks as selling stocks will easily lead to losing direction. The real reason we buy stocks is to allow the object we buy to realize value appreciation. There are two types of value appreciation: one is value return, and the other is value growth due to good business operations. This is the destination that investment should persist in, rather than judging based on price and casually getting on and off, just like a friend said, after a car flipped over once, those who survived learned to choose the right bus to get on. - Three forms of stock market crashes (2015.8.11).
Based on my limited reading and understanding, I roughly summarized 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. The second is when internal factors in the stock market lead to a 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 due to stocks rising too much and too fast, causing a crash. For example, the 1929 US 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 save 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.
The second situation is relatively straightforward because we know where the enemy is and who the opponent is. As long as we have the strength to surpass the opponent, we can take out real money to counterattack and drive them back.
The third situation is more complicated. The 1929 US stock market crash reportedly occurred because there were rumors that the stock market had fallen that morning, 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 after rising too much and too fast. So, should this situation be rescued? Should the government intervene? At that time, the US government respected the market and did not intervene. As a result, the stock market's sharp decline 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 US history.
I have read books introducing the history of American finance, and the 1929 stock market crash is a case study. In such a situation, should the government intervene? The relevant regulatory authorities in the US concluded that the market should be rescued. Since then, although the US stock market has experienced many crises, due to government intervention, it has never experienced such a long-term depression as in 1929. - Operating based on financial statements (2015.9.30)
Simply looking at financial statements for value investing in stocks generally 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, their mindsets today might be completely different.
A's experience: I finally found the right path and no longer fumble around; I hold Moutai for long-term investment.
B's experience: I have basically understood the valuation methods of value investing. I want to find the second Moutai.
2; If an old stockholder has made a continuous profit of 40% every year for the past few years, he will become increasingly silent because he knows that in the coming 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 stockholder has made a continuous profit of 40% every year for the past few years, he may become increasingly arrogant, thinking that defeating Buffett is not as difficult as imagined.
Afterthought: I now find that my mindset is very much in line with that of 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. Only a small portion of the time is it stronger than the market. Watching it gives you the feeling that this stock is not good. Forget it, and look again in a few years, and it will have risen a lot.
This is not difficult to understand logically. Think about it, 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 based on Buffett's return of 20% per year, if it rises by 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 will definitely 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, and the stock market is just a casino, then cash will be the norm in your assets. You will look for opportunities to buy low and sell high in the stock market and run away after making a profit, waiting for the next opportunity. If you can't wait for the opportunity, it doesn't matter, because money is the most reliable.
If you subconsciously believe that the assets of quality companies are the most reliable, cash will gradually dilute into nothingness in your assets. 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 a lot of 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 market trends, and summarizing how much money was made or lost each year are all things of the past for me.
Investing in hot stocks or judging market trends involves a process: investing a pile of funds to buy stocks, then selling the stocks 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 the price of a stock cannot rise to the sky. But if your judgment is accurate enough, you can achieve unlimited returns through continuous trading or rotating hot stocks. This is why people like to keep looking for hot stocks and judging trends.
However, this operation has several problems for me: First, as I get older, I am always in a state of tension, which is too tiring. Second, even if I have a lot of experience and my probability of being right in 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 makes me feel like I am always preparing to set off on a journey, and the road ahead is very uncertain, which 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 well based on conservative dividends. Then, as time goes by and my age increases, the dividends will gradually lower my purchase 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. Sudden events can affect stock price fluctuations, but they will not affect company dividends. Therefore, for someone who cares about stock dividends rather than price differences, 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 eventually be left as assets for future generations. Isn't that nice?
As for how much Buffett earns each year, or how much other bulls earn in the stock market, it is not important to me at all. I don't care whether I outperform or underperform the index each year. What I care about is how much the dividend is this year and when I can recover my investment. (Of course, I can sell some stocks to recover my investment, but I hope to recover my investment by earning money from listed companies).
Afterthought: A company can be understood and concluded after several years of observation and understanding: whether it is our friend or not, and whether it is worth deepening the relationship. If it is our friend, there is no need to carefully review it every year. When the annual report comes out, what I care about is just one thing: how much the dividend is this year?
Holding a few such company friends at a reasonable price means that you don't have to worry about bull or bear markets, you don't have to worry about outperforming the index, and you don't have to worry about who the hot stocks are. Every year, with 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 insights to buy bargains. Buffett wanted to buy Walmart but waited many years without finding a cheap price. In the future, this may also be the norm for China's A-shares. Opportunities for irrational and significant declines are hard to see in the short term.
My conclusion is that if you are fortunate enough to buy quality blue chips at low prices, please hold on tight and cherish the opportunity that history has given you. If you are buying large-cap blue chips later, please be a patient person; this is the bottom area. Fluctuations and shocks are not risks; they are just the norm of 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 each.
This logic seems correct, but it actually hides many concepts that contradict investment.
First, based on my experience, the biggest enemy of investment is: thinking about how long it will take to make several times the profit when buying. This kind of thinking is not good.
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 achieve this, you must accurately judge things that cannot be judged. According to this logic, it can also be concluded that buying a stock that doubles is not as easy as buying three stocks that rise by 26%. Buying a stock that rises by 26% is not as easy as buying three stocks that rise by 8%. The extreme is: earning 1% in a day is easy, and you can earn 365% in a year.
Of course, Qiu Guolu, as a fund manager, has several excellent fund managers under him. He has the conditions to study many industries and companies. In addition, the standard for investors to judge whether a fund is good or not is also the short-term appreciation speed. It is natural for him to have this experience and pursuit. However, for ordinary investors like us, such ideas may not be suitable.
Afterthought: This statement from Qiu Guolu is simply poison for ordinary individual investors! Because you have to find continuously rising stocks, which 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 stocks (actually there are countless types). One type is long-term investors based on value. The other type is short-term investors who treat it as a "value" topic for speculation. Obviously, the latter has withdrawn after gaining a certain price difference.
The price of stocks fluctuates every day, and most people always feel that as long as the asset exists in the form of stocks, the asset is always fluctuating, with no certainty, and they do not know who the money ultimately belongs to. They stare at their accounts every day, thinking: if the account increases by 100,000, they think: I can change my Toyota for a BMW. If it decreases by a few thousand, they think: a wheel is missing. Even if it decreases by 100 yuan, they will think: two days' worth of vegetables is gone. Therefore, every once in a while, when they make some money, they want to cash out, and when the money becomes a fixed number in their account, it seems to confirm the ownership of the asset, making them feel secure. There is a very vivid term: cashing out for peace of mind.
Most investors who cash out for peace of mind are only temporarily at ease. It seems that as long as they confirm the ownership of the property, they will feel uneasy again. When stocks fall, they are eager to bottom fish. When stocks rise, they suddenly feel that cash is particularly annoying, and they would rather change it for any stock than keep cash.
The first type of people increase the water level slowly. The second type of people increase volatility. This is the stock market.
Blue-chip stocks are adjusting at the end of the half-year, which is completely normal. Once the adjustment is over, those who should cash out will cash out, and blue-chip stocks will still be the main theme, continuing on the path of recovery.
Afterthought: Stop-loss and cutting losses also exacerbate volatility, while volatility amplifies stock returns. Volatility is an important factor for stocks to exceed bond yields. - Don't be hard on yourself (2017.10.10)
If a few years ago someone told you: jade and mahogany have risen dozens or hundreds of times in recent years. You would definitely be surprised and then do whatever you want. Because you know you are not in that line, that money has nothing to do with you.
If someone told you: certain stocks have risen several times recently. You might quickly open the stock chart and then regret not discovering it earlier. Especially unbearable is: that it is a real estate stock, and you hesitated to buy it.
Then, late at night, you would lie in bed, tossing and turning, calculating how much better off you would be if you had bought that stock. Then you endure and endure, and finally can't take it anymore and rush in.
In fact, you may have an illusion that once you enter the stock market, you are in the investment industry, and all stocks in the stock market are money you should earn. If you haven't earned it, it means you are not capable enough. Haha, it is good to have strict requirements for yourself, but don't be hard on yourself, as that does not conform to 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, whether it is bull market thinking or bear market thinking. PetroChina's stock price was 48 yuan at that time, and the reasons were very sufficient. First, Chinese cars were beginning to enter households, and future demand for gasoline was huge. There were currently less than 100 million cars, and if the number of cars reached 200 million or 300 million, how much would the oil price be? It is reasonable and justified for oil prices 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 billions of barrels of proven underground reserves does PetroChina have, multiplied by 200 dollars per barrel, what is its value? (The previous land reserves were very cheap and appreciated greatly). Conclusion: Every share at 48 yuan is not expensive. This is bull market thinking. Similarly, PetroChina is now in bear market thinking: there were fewer than 100 million cars in China, and oil was 150 dollars per barrel. Now there are 300 million cars in China, and oil has not only not risen to 200 but has fallen to 50 dollars per barrel, plus shale gas and future electric vehicles as the mainstream. Now PetroChina is 5 Hong Kong dollars per share, although it is not expensive, but why buy it?
Most stocks have this problem. For example, Laojiao, a jar of 1963 vintage liquor weighing 350 jin was auctioned for over 12 million. When calculating the assets of Laojiao, how much is the 50,000 tons of old liquor worth? Of course, it is calculated at the manufacturing cost, which is a few hundred yuan per jar. How much is the 1619 ancient Laojiao pool worth? Of course, it is worth 0, as it has long been fully depreciated. Will the valuation system for liquor change in two years? That would not be a good thing!
Afterthought: The valuation example of PetroChina is very good! Moreover, the reserves of PetroChina have indeed long been overlooked! Now the rising Shaanxi Coal and China Shenhua are starting to be taken seriously. - Stock market V's are idiots in other industries (2021.9.10)
As people age, every year, a large number of new stockholders enter the stock 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. Based on this foundation, if you have bought some good stocks over the years and made some money, you can consider yourself a veteran in the stock market.
Facing the many new stockholders entering the market, if you are willing to answer their naive questions and enlighten their investments with your understanding and experiences, along with your profitable performance, it is not difficult to gain followers.
If you are not very socially active and spend a lot of time on investment-related forums online, over time, you may easily feel that you are wiser than most people. If you are not old enough, you may unconsciously think you can set an example in various aspects.
Unfortunately, this is evident in the statements of some prominent figures on Xueqiu, and you can be sure that they have not realized this.
Afterthought: This point is very evident in many prominent figures, including myself. Retail investor B can clearly recognize everyone's limitations, which is admirable. - The surface and the whole of things (2021.10.21)
I state a truth: The Chinese stock market is generally good in the long run, and short-term fluctuations are inevitable.
This statement is true because it does not set a specific duration for the long-term or short-term. It conforms to the long-term development laws of humanity and the short-term forms of the market.
Investment is a simple matter: look at the US stock market over the past century; 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 the matter.
Investment is also a very difficult matter: 93% of the world's top 500 companies a hundred years ago have disappeared today. This means that if you simply hold good stocks for a hundred years, you may not have made a lot of money, but there is a 93% probability that you will have lost it.
This is the whole of the matter.
There are countless such relationships between the surface and the whole in investment. The more you understand, the higher your investment awareness will be.
Afterthought: High returns require long-term holding, but the vast majority of companies will decline, making them not worth holding for the long term. Therefore, the simple way is to find companies with strong competitive advantages that can operate sustainably for the long term. - You don't need to buy too many value investment books (2022.1.3)
Buffett has never written a book; his philosophy is all in the letter he sends to shareholders every year. No matter how many times you say it, it boils down to one sentence: buying stocks is buying companies.
Duan Yongping is a successful practitioner of this philosophy. He has many insights about investing over the years, all of which are interpretations of Buffett's investment philosophy.
If you want to become a value investor and establish a correct value investment philosophy, you only need to carefully understand and ponder the thoughts of these two people. There is no need to buy books on value investment in the market; they are either repetitive or distorted. Those books that boast about how many times they made money over the years are just collecting your IQ tax.
The important thing is how we can transform knowledge into our own understanding.
Afterthought (2022.5.23): I have printed and read Buffett's letters to shareholders and the Q&A from the shareholder meeting. I have also printed Duan Yongping's collection. For other books, I plan to sell most of the investment books on Xianyu. - The old tune of "value investment" (2022.1.8)
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 reads 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 the price fluctuations in the stock market 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 that Laojiao had a good business, high gross profit, cash flow, and no debt. When the market was bad, inventory would not depreciate, etc. He then predicted that Laojiao's performance could support a stock price of 50 yuan by the end of 2017, as it was undervalued at the current price of over 20 yuan. It can be seen that he actually knew what kind of company to buy and at what price to buy.
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 of Laojiao breaking through 30 yuan was still too early, and the performance would not catch up so quickly. Combined with the K-line chart, 30 yuan was repeatedly a strong resistance. So he decided to sell first and wait for the stock price to come back before buying in at a lower price. Haha, I can still find our chat records from back then. I roughly said: Your advantage is your intelligence, but your disadvantage is that you are too smart. He never posted again on the Laojiao forum after that.
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 offers to buy it for 500,000, you definitely wouldn't sell it. The next day, if someone offers 400,000, you certainly wouldn't sell it either. If that person says, "If you don't sell it to me for 400,000 today, someone else will offer you 300,000 tomorrow," you would definitely kick him out with a stick. But in the stock market, such things happen every day.
Afterthought: I once made the same mistake when Laojiao broke through 100 yuan, thinking it must have to be pulled back, resulting in me losing some Laojiao shares and becoming a laughing stock. - Why I don't care much about the bull and bear markets and short-term performance of companies (2022.2.18)
If I had seen someone say this 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, it was because the dimension I was in determined my perspective on the issue. If you also don't understand what I'm saying now, I hope you can carefully consider 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 retail investors holding Laojiao on Xueqiu, the number I hold should be relatively large. However, in recent years, I have hardly spoken about Laojiao and rarely discussed it.
Why? Because to be honest, I have nothing 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 the long-term stock price trend)?
I don't know either.
Of course, I pay attention to all information about Laojiao (market, sales, progress in East China and South China, etc.), but this information is fragmented and difficult to quantify into specific conclusions, so I am too lazy to write.
If investing, if you don't care about bull or bear markets and short-term performance of companies, what do you care about?
This involves the dimension you are in. If you are in a three to five-year holding period, the bull and bear markets and 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 social average return rate (which is 7% in the US), then the longer you hold, the greater the returns your assets will bring you. I am determined to hold for the long term.
Once these two viewpoints 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 and bear markets have little impact on this indicator. Second: whether the performance growth rate is high or low, or even declines a bit, also has little impact on this indicator. For example, if a company had a performance of 2 billion last year, and this year it grows by 10% to 2.2 billion, or grows by 20% to 2.4 billion, or declines by 10% to 1.8 billion, these three figures are very normal for a long-term operating company, and their impact on the long-term return on equity for shareholders is also minimal. However, these three figures are used as the basis for short-term valuation of the company in the stock market, which greatly affects short-term stock prices.
At this point, there is another important issue that determines your dimension: the cost of holding. 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 you receive will also be mediocre. If your holding cost is far below the net asset value, then your actual return will be higher. For the same stock, people with different holding costs will have different focuses. Taking Moutai as an example, we know that a few people on Xueqiu who hold Moutai at a very low cost have hardly spoken anymore. They only focus on major events that can affect Moutai's long-term development, while they hardly care about short-term performance growth rates.
Finally, the understanding of the business of the company you invest in and the understanding of the company's assets (the difference between a factory and equipment of Lao Gan Ma and Lao Gan Ma) determine what stocks you buy.
Afterthought: Firmly holding a part of a high ROE company with a relatively low holding cost (preferably close to the net asset value per share) means you don't need to care about the bull and bear markets and the growth rate of companies.