Read this before you sell. If you are reading this, the market is crashing. The indices—QQQ, VOO, and everything else—are likely down 30% or more. The news cycle is screaming that the “bubble has popped,” that “this time is different,” and that the economy is heading for a depression. You are likely feeling a physical knot in your stomach, a mix of regret for not selling at the top and fear that your portfolio is going to zero. ...
A note to my future self—the one who might be panicking during a crash or getting a big head during a boom. We often hear the saying, “The stock market is a form of spiritual discipline.” But for most of us, it’s less about Zen and more about a severe case of “investment schizophrenia.” If you look back at the 2000 Dot-Com Bubble or the 2008 Financial Crisis, countless investors kept repeating the same tired script: They got greedy when they should have been terrified, and terrified when they should have been greedy. ...
Patient Investing If you buy something because its value is undervalued, you must consider selling it when its price rises to your expected level. That is difficult. But if you can buy a few great companies, then you can sit back and relax. That is a great thing. We tend to put large amounts of money into places where we don’t need to make further decisions. Diversification The idea that investment should be as diversified as possible is a delusional concept. We do not believe that highly diversified investments produce good results. We believe that the diversification level of almost all good investments is relatively low. If you remove our 15 best decisions, our performance will be very mediocre. What you need is not a large amount of action, but extreme patience. You must stick to the principles, and when the opportunity comes, you must seize it forcefully. Over the years, Berkshire has made money by betting on things it is confident about.
What you need is not a lot of action, but a lot of patience What you need is not a lot of action, but a lot of patience. You must stick to your principles, and when the opportunity comes, you must seize it with force. There are many situations that are much worse than being swamped in cash and doing nothing. I remember the time when I lacked cash—I certainly don’t want to go back to that. —Charlie Munger ...
Investing is like going out to bet on horses. We are looking for a horse with a 50% probability of winning, and odds of 3-to-1. What you are looking for is a bet with mispriced odds. This is the essence of investing. You must possess enough knowledge to know whether the odds of the bet are mispriced. This is value investing.
Patience: The Art of Patient Waiting Look at those hedge funds—do you think they know how to wait? They fundamentally don’t know how to wait! In my personal portfolio, I once held only $10 million to $12 million in government or municipal bonds for several consecutive years, and then I didn’t touch them, just quietly waited, waited… “As Jesse Livermore said: ‘The secret to making big money is not in buying and selling… but in waiting.’” ...
Lump-Sum Investment or Regular Buying? When you receive an inheritance or another large sum of money, have you ever wondered whether to invest it all at once, or spread the money out and invest it gradually? The past 150 years of history tell us that the North American stock market rises roughly two out of every three years. From a statistical perspective, the longer your money stays in the market, the more likely it is to grow. Therefore, the solution to this dilemma is to invest it all at once, while remaining aware that the market could drop at any moment. If you are uneasy about lump-sum investing, you can set up a simple system for incremental investing (for example, investing 25% of the total amount on the first day of every month, continuing this for four months). ...
The stock market is like a very excited dog, tied to one end of a long leash, with the owner holding the leash, allowing the dog to sniff randomly in all directions. Assume that in this example, the dog owner represents the economy, walking in New York City, starting from Columbus Circle, passing through Central Park, and arriving at the Metropolitan Museum of Art. From one second to the next, the dog might turn right or left; its movement cannot be precisely predicted. ...
Merton Malkiel’s adage: “Never buy from someone who is out of breath.” Warren Buffett has said something similar: “Be wary of investment activities that draw applause; true investment genius is usually very boring.” When trillions of dollars are managed by Wall Street figures who charge high management fees, it is usually the managers who gain massive profits, not the clients. Don’t think you know more than the market; no one knows more than the market. Don’t act according to your own views—you might think it’s just your idea, but in reality, millions of people think that way. ...
On Saving and Thrifty Lifestyle The Power of High Savings Save and invest an unwavering 50% of your income. The beauty of a high savings rate is twofold: you learn to live on less, even as you have more to invest. When you can live on 4% of your investments per year, you are financially independent. Financial Independence vs. Dependence If your lifestyle matches or exceeds your income, you are a slave. It’s better to adapt yourself and your attitudes to the numbers than to adapt the strategies to your psychological comfort levels. Long-Term Savings Strategy If financial independence is your goal, your savings rate in these years should be high. As you invest that money each month, it serves to smooth out the market’s volatility. Be persistent. Life is uncertain. On the Stock Market and Investing Fundamental Investment Rules Rule #1: Never lose money. Rule #2: Never forget rule #1. The Stock Market as a Wealth-Building Tool The stock market is a powerful wealth-building tool, and you should be investing in it. Embrace indexing. Crashes, pullbacks, and corrections are all absolutely normal. Avoiding Short-Term Speculation Any investing done short-term is, by definition, speculation. Market timing is an unwinnable game over time. To play this market-timing game well even once, you need to be right twice: first, you need to call the high, and then, you need to call the low. Market Dynamics and Long-Term Perspective The market always recovers. Always. Everybody makes money when the market is rising. But what determines whether it will make you wealthy or leave you bleeding on the side of the road is what you do during the times it is collapsing. Common Pitfalls in the Stock Market Most people lose money in the stock market. Here’s why: We think we can time the market. We believe we can pick individual stocks. We believe we can pick winning mutual fund managers. Dollar-Cost Averaging By dollar-cost averaging, you are betting that the market will drop, saving yourself some pain. For any given year, the odds of this happening are only about 23%. But the market is about 77% more likely to rise, in which case you will have spared yourself some gain. With each new invested portion, you’ll be paying more for your shares. Put all your eggs in one basket and forget about it.
Trump’s New Tariff Policy and Stock Market Plunge After Trump announced the latest tariff policy, the global stock market plummeted. So far this year, the market has lost 20%. Although I am not panicked, this experience made me deeply understand one principle: a certain amount of cash must be maintained in the investment portfolio. Market Surprises Always Arrive Unexpectedly The market always experiences various surprises, once every few years. For example, the 2008 financial crisis, the 2015 market crash, the 2020 Wuhan pneumonia, and even the 2025 economic world war. Every market plunge is an excellent buying opportunity. The market is filled with cheap assets; if you don’t have cash in hand, you might miss the chance to get rich. ...
There are just three primary reasons for which you should consider selling your stocks: 1. Investment Reasons No Longer Exist For example, Blockbuster was a great company for many years and was well ahead of the curve when it came to in-home DVD rentals. However, they didn’t adapt to the streaming revolution. In fact, Blockbuster turned down the chance to buy Netflix on three separate occasions. 2. Compromised Management Small lies eventually lead to bigger lies. If you begin to spot inconsistencies in the way management communicates its shortcomings or if it starts to treat everyone else like a bunch of dunces, it is likely that the management is incompetent. You’re best served by getting out quickly. ...
The Secret to Successful Investing What is the secret to successful investing? It is to do nothing—well, not quite nothing, but our point is that to be successful, you need to limit your activity as much as possible when it comes to managing your investments. The Risks of Short-Term Trading Short-term trading involves all kinds of risks. Essentially, a trader is attempting to gauge how the market feels about a stock. Here’s an experiment for you to conduct: walk over to your partner and try to guess how they’re feeling about something. You might be able to guess what is wrong some of the time, but not all the time. This is similar to trying to predict the market’s sentiment. ...
If you don’t have the cash to pay your bills, you may be tempted to sell some of your investments before they have a chance to fully blossom. Your Rainy Day Fund Purpose: A 3-6 month reserve of living expenses in case you or your partner lose your jobs. Storage: This money should be held in readily accessible cash and not invested under any circumstances. Tuition Payments Purpose: Money needed to pay bills or your child’s tuition. Guidance: This money should not be invested in the markets. Ensure it is kept in a safe, liquid form. Down Payments Purpose: Funds for a future home purchase. Guidance: Even if you’re planning on purchasing a home several years down the road, avoid relying on the stock market to generate enough money for a down payment. Keep these funds in a stable, low-risk account.
Pre-Trade Checklist for Equity Trading I. General Principles (Must Read Before Every Trade) Goal Confirmation Does my operation serve my long-term investment goals? Am I trading impulsively due to short-term market fluctuations, emotions, or external advice? (If “Yes,” pause and calmly review the situation) Cost Consciousness Do transaction fees (commission, stamp duty, management fees) significantly impact returns? Is “friction cost” accumulating due to frequent trading? Discipline ...
Ultimately, it still comes down to that famous saying: The market is a voting machine in the short term, and a weighing machine in the long term. Speculation is a zero-sum game—my lessons in speculation The essence of reducing trading frequency Investment vs. Speculation in “Enough” Market Sentiment is Random The market is essentially like a person with average intelligence. You might occasionally guess the market’s sentiment, but to make money, you need to guess correctly twice (the buying point + the selling point). And if you guess wrong just once, you lose money. This is a very simple mathematical problem. ...
1. Basic Concepts of Rebalancing Asset Allocation: Investors set the proportions of different asset classes (such as stocks, bonds, cash, etc.) based on their risk tolerance and return objectives. Market Volatility: Market fluctuations can cause asset proportions to deviate from the target, for example, a rise in stocks might make their share in the portfolio too high. Rebalancing: Adjusting the portfolio back to the target proportions by buying and selling assets. 2. Methods of Rebalancing Time-based Rebalancing: Adjusting the portfolio at fixed time intervals (e.g., quarterly or annually). Threshold Rebalancing: Adjusting when a specific asset class deviates from the target proportion by more than a certain threshold (e.g., 5%). 3. Advantages of Rebalancing Risk Control: Prevents a single asset from becoming overly dominant, thereby reducing risk. Discipline: Avoids emotional decision-making and maintains the stability of the investment strategy. Return Optimization: May enhance long-term returns by buying low and selling high. 4. Disadvantages of Rebalancing Transaction Costs: Frequent adjustments may increase trading fees. Tax Implications: In taxable accounts, rebalancing may generate capital gains tax. Market Trends: In a unidirectional market, rebalancing may reduce returns. 5. Implementation of Rebalancing Determine Target Proportions: Setting asset allocation based on risk preference. Monitor the Portfolio: Regularly checking asset proportions. Execute Adjustments: Restoring target proportions by buying and selling assets. Summary Rebalancing is a tool that “exchanges short-term transaction costs for long-term risk control,” making it suitable for sideways or sector rotation markets, but potentially incurring opportunity costs in unidirectional trending markets. When executing, it is recommended to combine threshold rules (e.g., rebalancing after a 10% deviation) rather than operating mechanically by time. Furthermore, it is suggested to perform adjustments no more than twice a year.
To be a winner, or to avoid being a loser? Being proactive can yield greater rewards, but in the long run, it is not always beneficial. When luck is bad, one may encounter developments that are less than expected, leading to frustration. Short-term success is generally recognized, yet there is insufficient attention paid to its persistence and stability in the records. Timing the Offensive-Defensive Shift Few people (if any) have the ability to instantly adjust tactics to match market conditions, so investors should stick to one method, hoping that this method can apply to various different scenarios. ...
We should focus on finding value in observable factors—such as industries, companies, and securities—rather than basing our decisions on predictions about the relatively unknowable macro-economic world and market trends. Since the future is uncertain, we must acquire value through methods such as strong conviction, forward-looking analysis, and buying assets at lower prices when opportunities arise. We must adopt a defensive investment strategy because many outcomes could be detrimental. Crucially, the goal is to ensure survival in the market under negative scenarios, rather than guaranteeing maximum returns under positive ones. To increase the probability of success, when extreme conditions arise, we must adopt a contrarian approach: being aggressive during market downturns and cautious during market exuberance. Since outcomes are inherently highly uncertain, unless they have been rigorously tested and verified, we must view the decisions and their resulting outcomes skeptically—regardless of whether they are positive or negative.
What you need is not massive action, but massive patience. Money moves from the pockets of the impatient to the pockets of the patient. Speculation might earn huge profits once or twice, but in the long run, it is not replicable, not sustainable, and is even destined to fail. True success relies on compound interest, on daily incremental progress, and on sustainable development.