According to data from Oriental Fortune Network, as of November 2021, there are 196 million stock accounts in the country, and these accounts are only a part of the total number of people participating in domestic investment. There are also a large number of people participating in investment activities through banks, online payment platforms, and so on, which is several times the number of people with stock accounts. With so many people participating and the direct involvement of money, countless opportunities and risks coexist. In the face of such a situation, how to survive in this field may require some thinking. Blindly following the trend will only be hunted and harvested!
Introduction
For a modern person, to live a long life, one must inevitably participate in economic activities, whether it is buying food or earning rewards through work. For someone who wants to live a good life, investment is an inevitable activity. You can keep your money in banks, payment platforms, or buy stocks, funds, real estate, futures, and so on. But to participate in these activities, you must first have a certain amount of knowledge and theory, and operate after having a certain understanding of the activities. Otherwise, what awaits us will be disappointment, pain, and even despair.
In this article, I will elaborate on some basic investment considerations that I think are important.
Basic Investment Knowledge
- Who participates in investment?
Whether we work hard to earn money, keep money in banks or financial institutions, or participate in financial trading markets, we are all participating in investment in different ways. In modern society, everyone is a member of the economic system, so everyone is participating in economic activities and investment activities.
Therefore, it is crucial for each of us to have a basic understanding of knowledge and concepts, which can effectively guide our participation in economic activities, protect our interests, and increase our potential for returns.
- What is the first element of investment?
Since investment is a national affair, what is the most important and concerning factor for an investor?
Return on investment.
Simply put, it is the proportion of returns we can generate after investing a certain amount of capital. Regarding return on investment, we need to pay attention to:
- Investment returns must be positive.
In terms of investment returns, it is crucial to always maintain positive returns, as it determines our investment income. Some investment institutions may claim to have the highest investment returns, but what they don't mention is that the lowest return rate may even be negative. Some people may say, "Your investment return rate is 20%, 30%, mine is -20%, 70%. So, in the end, we both have 50% return, right?"
Actually, that's not the case. Let's calculate the data from the example above. If each person's investment is 10,000 yuan, the first person's returns would be 12,000 (10,000 + 10,000 * 20%) and 15,600 (12,000 + 12,000 * 30%), while the second person's returns would be 8,000 (10,000 - 20% * 10,000) and 13,600 (8,000 + 70% * 8,000). From this, we can see that the person with positive investment returns at the end of both cycles has higher returns.
Therefore, don't be deceived by "super high returns" from some people. Consider both the highest and lowest points of data and ensure that they are positive before taking action.
- How to participate in investment?
For most people, even if they want to participate in investment, they don't know how to start. I will explain it in four parts: what to buy, how much to buy, when to buy, and the most effective investment method.
- What to buy?
First of all, to participate in market investment, it is important to determine what products are suitable. "Suitable" means choosing within your applicable range.
Based on applicability, analyze various aspects such as the risk of the product, our requirements for fund liquidity, and fund security. Consider various information based on your own situation and find the intersection of various needs.
- How much to buy?
There is an old saying in the market, "Don't put all your eggs in one basket." Our investment behavior is to seek maximum returns while protecting the principal. Therefore, we can purchase multiple assets, but we should also be careful not to spread the funds too thin, as it may lead to insufficient returns.
We can start with cash as a foundation because of its strong liquidity, which can support our daily needs. ETF products can effectively diversify risks. Based on this, we can purchase some high-value assets to ensure the stability of the return structure.
- When to buy?
Different products have different lifecycles, and the market environment also has its own lifecycle. Therefore, we can choose different buying and selling timing for different products based on the market cycle to achieve returns during the ups and downs of the cycle.
Based on the economic cycle, we can know that when the economy is in a stagnant period, the government and companies will issue a large number of bonds to stimulate market vitality. This is a good time to buy bonds. When the market is in an upward phase, it is favorable for companies. At this time, we can hold stocks to obtain effective returns. When the market is in a high-growth phase and requires a large amount of resources for production and construction, we can profit from trading commodities. When the market lifecycle is in a downward state, holding high-quality assets and cash is a more secure choice.
The above are relatively effective investment methods based on different stages of the market lifecycle. However, for most people, it is impossible to clearly see the market. If we enter the market blindly, we will only face failure and loss. So, how should the majority of people invest?
- What is the most effective investment method?
As mentioned above, the majority of people do not have the ability to predict market changes. So how can we invest?
Index funds.
We can learn and choose excellent funds, and buy and hold index funds for long-term gains.
Investment First Principle
Investors have their own principles, which I call the first principle of investment. It is a rule that you must follow and cannot break. In my opinion, the first principle of investment can be summarized in one sentence:
"We can only make money within our own understanding."
This sentence has two meanings:
-
Don't touch things you don't understand, otherwise the consequences will be disastrous. Understanding doesn't mean being an expert, but at least having a basic understanding and knowledge within a certain range. Then, gradually try from less to more, constantly enriching our knowledge and understanding of the market through experimentation.
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To earn more, we need to expand our cognitive boundaries. Expanding cognitive boundaries is comprehensive. It not only requires integrating basic knowledge in various fields related to expanding boundaries but also continuously accumulating our own energy in depth.
Rethinking Investment
The above discusses investment-related considerations in the economic field, but these considerations are not only useful in the economic field but also in other fields. We can consider the above methods and thoughts as a set of tools. Following this line of thinking, we can analyze and think about everything in life, which I believe will be beneficial to our employment, work, career growth, and even family relationships.
As we enter the third year of the pandemic, perhaps we need to take some time to reflect on our usual lives. I believe there are many things that we have overlooked or forgotten.
Reading List:
Books:
- "Detailed Talk - Zhang Yong" by Li Xiang
- "Using Yourself as a Method" by Xiang Biao
- "Product Journey: Methodology and Practical Advancement for Product Managers"
- "China in the Eyes of Flying Tigers Members: 1944-1945"
- "Think Well" by Cheng Jia
- "Winning at Work" by Koji Takashiro
- "15 Lectures on Logic" by Chen Bo
Courses:
- "2021 Chaos Academy Mid-Year Course"
- "Chaos Academy - The Ultimate Theory of Everything"
- "Chaos Academy - The Bandwagon Effect"
- "Zhu Jiawei - Comprehensive Understanding of Blockchain in 30 Lessons"
Movies:
- "Thirteen Invitations - Liu Qing"
- Nikita Mikhalkov's "Relatives"
- "Under the Sun"
- "War and Peace - 1966 Soviet Version, 4 Episodes"
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