The capital market is a battlefield without gunpowder. Many people got the wrong direction from the beginning. The first goal of investing is being alive, other than making profit.
From the perspective of business models, you must consider the important issue of how to protect yourself and how to control the risk of your investment. Firstly, you should stay away from leverage, and secondly do a good job in continuous cash flow management.
There are only three kind of people who can make money directly in the capital markets in the long run:
- The first kind is the fundamental group
They are good at digging out the companies which have excellent fundamentals and making investment with high certainty. Once they buy the stock, they hold it no matter how volatile the market is. They believe thatThe market would recognize the real value of undervalued companies.
The fundamental group can be seen as strategic investors. Before making the investment, they select the target strictly and accomplish a great qualitative analysis. prevent the risk of wrong investment direction. Risk control, the victory of investment is more than half. The second most important condition is that the investment funds must be the long-term funds. Therefore, it is easier to wait for the market to approach the fair value of the company. "Strick selection" and "long term funding" are essential to the success of the fundamental group.
- The second kind is the market group
The market group consists of very smart traders who are good at capturing market trends. They have skills in analyzing technical graphs and trade using a sophisticated trading system. This kind of investor is not technically an investor, but a speculator at best. Speculators spend a lot of time watching trades on every trading day and find the opportunity when ordinary investors become panic.
I once encountered a master trader who focused on speculation in securities stocks, and gain from hundreds of thousands of equity to hundreds of millions of assets. This expert trader is very good at seizing cyclical investment opportunities and dared to enter heavily when the market is down. Especially in 2018, when securities stocks fell below their net value, he bought large positions, and when the market went up, he dared to exit quickly and gradually withdraw from the market. He is very good at capturing the trading psychology of ordinary people. That is his secret of making profit.
- The third group are people who barely trade.
The third kind is an extremely rare species on the market. They perennial have no position in the market. They wait patiently and never buy stocks easily. When the market become panic and the price fall dramatically, they begin to buy stock in several times. These people generally retreat after having a return of 20-30% and they sell the stocks and maintain the yields.
Those investors trade only 1-2 times a year. They are very focused and stick to familiar companies by seizing the opportunity of investing individual stocks, the third group could obtain 20% return. They are also the most anti-human kind of investors. This kind of traders have very different personalities and are very incompatible. They have their own trading rules, and they understand the fundamentals and technical aspects as well. However, those traders know how to rest, which is their biggest advantage. Many investors fail to invest because of frequent trading, but they cannot become the second type of person. The risk control method of third group is to know how to rest and when to shoot, which is also worth learning for all investors.
Each of the 3 kind above has its own advantages. The risk control logic of each group is different, and the logic is the essence of these groups. If you can't understand the essence of it, you would end up in a heavy loss.
The core of investment is risk management. Those who only peruse profit and ignore risk will learn from the market. Investment is the most profound practice in life. It is very difficult to make long-term profits and keep the profit. So, the question is what kind of investors you want to be?
(Images from the internet)