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Dialogue with Zhu Ning: You can't earn money beyond your understanding, critical thinking is very important | Chongyang Talk Vol.13

Investment can be said to be a combination of science and art. Science refers to aspects such as the assessment of macroeconomics, analysis of corporate fundamentals, etc., which can be framed using Algo. Art refers to the cognitive and behavioral frameworks of investors. This aspect is also very important, but from the perspective of investment practice, most investors, especially individual investors, place a lot of emphasis on scientific aspects, while the emphasis on investment cognition and investment behavior is relatively insufficient.

This episode of Chongyang Talk is hosted by Shutangfeng, a partner at Chongyang Investment and a financial writer, inviting the renowned behavioral finance expert, Professor Zhu Ning, Vice Dean of the Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University, to discuss who is a friend of the investor and who is the investor's enemy.

[Full text 9224 words, a lot of practical information, but also very long. Welcome to download the 'Little Universe' APP and find 'Chongyang Talk' to listen to the audio version.]

(1) Zhu Ning talks about his relationship with mentor Robert Shiller.

Shu Taifeng: Professor Zhu Ning studied under Professor Robert Shiller, a renowned master of behavioral economics and Nobel laureate in economics. I would like to ask Professor Zhu to share about his interactions with his mentor and what kind of inspiration he has received from him.

Zhu Ning:Actually, I feel particularly fortunate. During my studies in North America, I had three different mentors who not only helped me in academic research but also greatly influenced me in terms of character and behavior. Beyond his research accomplishments, I find that Professor Shiller has provided me with two particularly significant insights:

The first is his genuine humility. After winning the Nobel Prize, there was an incident where he couldn't board a flight due to overbooking with United Airlines. A major news publication wrote a big article saying, 'Nobel Laureate Kicked Off the Plane.' In a later interview, he said, 'I have never believed that because I won the Nobel Prize, I am different from others.' This inspires me to always maintain purity in academia and in life.

The second is his strong commitment to sharing his knowledge and research. Every year during the Winter Davos (Swiss Davos Forum), whenever journalists or participants ask him questions, as long as time permits, he engages in dialogue and exploration with them very patiently. This also inspired me to write books, give public speeches, and communicate with others after returning to my home country. I also feel the need to disseminate academic achievements to a broader audience.

(2) Why is it important to focus on behavioral finance?

Shutai Feng:I would like to ask Professor Zhu to help us build a systematic framework for investment cognition. Investment cognition, also known as 'Behavioral Finance,' is indeed very important. Most investors might be very strong in a particular area, such as technical analysis, but they lack an overall framework of investment cognition, which results in their skills being only a fragment, unable to see the 'forest' as a whole. Therefore, I would like to ask Professor Zhu to introduce again what the starting point was when you wrote your two books, 'Investor's Friend' and 'Investor's Enemy'. What kind of insights did you want to bring to everyone?

Zhu Ning:The reason I wrote these two books very simply and directly was to compile the lecture materials I accumulated while teaching at Tsinghua University and Shanghai Jiao Tong University. I have already told MBA and EMBA students about these contents many times, so why not make these insights available to more people through a book on Behavioral Finance? My initial writing began about ten years ago, shortly after I returned to the country, at a time when Behavioral Finance was undergoing a very rapid development phase. The entire field of Behavioral Finance has been studied for about 40 years, starting with Professor Shiller and 2017 Nobel Laureate Professor Thaler’s research in the mid-1980s. If we consider Professor Fama's Efficient Market Hypothesis introduced in the 1960s, Behavioral Finance has only been birthed in the modern financial theory development for a fraction of that time. Thus, my main motivation at that time was to share with domestic readers and investors some of the achievements made in the field of Behavioral Finance over the past two to three decades.

Why do I want to introduce Behavioral Finance? Although this is a field I research, and also a significant reason for Professor Shiller receiving a Nobel Prize, it also pertains to an issue that everyone cares about: Why have our traditional financial theories failed to effectively identify and predict the outbreak of financial crises? This has been a question raised from the government, investors, and academia after the financial crisis. Hence, I wrote this book from the context of the post-financial crisis era (2010-2011).

Professor Shiller said a phrase when recommending these two books, which I have repeatedly communicated with everyone: 'Investing is an activity that goes against human nature.' This suddenly made me realize why there is a need for investor education and advocacy. The difficulty of investing lies in the fact that it may not align with the inherent nature of humans, and may even be at odds with it. Buffett has said something similar: 'I am fearful when others are greedy, and I am greedy when others are fearful.' Summing up all of Buffett's legend is rooted in these two sentences, but very few people can truly achieve what he has said.So I believe there are three main tasks in Behavioral Finance: first, to understand investors; second, to help investors understand themselves; and third, to help them correct many mistakes they or others have made, to become better investors and achieve better investment returns.Learn from the many mistakes made by others to become a better investor and achieve better investment returns.

Shutai Feng:Professor Zhu's preface in "The Investor's Friend" has a statement that left a deep impression: behavioral finance provides retail investors with an understanding of the market and self 'first principles'. I think this is very important; we must delve into the first principles to understand all investment behaviors.

(3) How to cope with despair and fear during market downturns?

Shutai Feng:I believe that investor losses can be roughly divided into three stages: the first stage occurs when they chase after rising stocks in an optimistic market. Chasing leads to overvaluation, resulting in losses when prices decline. The second stage, known as the flat-lying stage, occurs during the early adjustments of the stock market; the market begins to improve, but investment behaviors do not change accordingly, thus leading to being gradually stuck. The third stage is called the panic selling stage, where, under prolonged declines or during sharp market crashes, investors fall into despair and engage in panic selling. Each of these stages has corresponding investment misconceptions. However, let's reverse the order and ask Professor Zhu to provide us with a detailed analysis on how to view and cope with market downturns.

Zhu Ning:Before answering this question, let's discuss what Buffett did during the 2008 global financial crisis. At that time, the U.S. stock market dropped from over 10,000 points to below 7,000 points in about six months, with the market down over 30%. Major financial institutions, represented by Bear Stearns and Lehman Brothers, filed for bankruptcy. Goldman Sachs also became a target for nationalization at one point, so he called Buffett. At that time, Buffett did what he does best: he purchased a large number of Goldman Sachs shares, which were around $80, basically their IPO price, and he bought preferred shares that guaranteed a certain return with an option to convert to common stock. The reason Buffett has become a legend in the American stock market over the past half-century, in my opinion, is largely due to such qualities.

We once took students to Omaha to see him. He said the reason he moved from New York City to Omaha was not only because it is his hometown but also because he did not want to be influenced by short-term thinkers who focus on "What will tomorrow's stock prices be?" and "What will next quarter's profits be?" Many investors are overly concerned with whether stock prices will rise or fall tomorrow, or whether they will make a profit or incur a loss next month. This reflects a lack of correct awareness about investing. As Buffett said, "Investing is like rolling a snowball, how do you make a snowball grow larger? You just need to do two things at the same time: one is to ensure that the snow path is long enough, and the other is to ensure that there is enough snow on the path." A long enough snow path represents time, and the sufficient amount of snow signifies having enough good companies and a large enough economy.

From this perspective, it seems that what the United States has had over the past century, China’s economy currently possesses as well. Therefore, even amid slowing economic growth and facing certain challenges and risks, there are still many great companies continuously growing. Returning to first principles, this is because the principles and fundamentals of investing remain unchanged.

So why is there such fear among everyone right now? I think as Tai Feng mentioned, people not only chase rising prices but also panic sell. The reason people chase rising prices and panic sell is largely because many investors do not objectively think about what tomorrow’s stock market will be like, but instead, they look back at what yesterday’s stock market was like and use what happened yesterday to influence or even determine their judgment of tomorrow. Extensive research shows that the capital market, especially the stock market, is precisely a random walk; no stock consistently rises or falls indefinitely, and no asset will continuously decline or appreciate. Therefore, the nature of this volatility and the linear thinking model of people are highly incompatible, which is a fundamental reason.

Shutai Feng:Professor Zhu initially mentioned Buffett's actions in 2008; he bought into Goldman Sachs at over 80, and after entering, Goldman Sachs' stock price continued to decline, but more than a year later, it doubled. This is where Buffett grasped the 'first principles of investment,' knowing that Goldman Sachs is a good stock, and the market decline just happened to create a very good buying opportunity and timing for him, which is also where the experts excel.

Zhu Ning:He has both courage and experience, and he also has money. He treats cash as an asset, as an option. I think this is where he differs from many ordinary investors; he does not think that his money is not making a profit today just because it is sitting here, but rather that the money is here for the opportunity to earn a large amount of money in the future.

He also said something that deeply impressed me, a statement that friends engaged in private equity investment would be very familiar with. He said when he invests in a stock, like Goldman Sachs, Coca-Cola, or Hershey, he often does not consider how much money he will make from the stock but instead thinks about whether he can avoid losing money in the worst-case scenario. This is very different from the thinking of many ordinary individual investors.Ordinary investors focus on the income side, while Buffett focuses on the risk side of investment. He thinks about how to maintain an undefeated position, which is also the reason he can achieve long-term compound growth. Many of us investors often fail to realize how much losing money affects long-term compound growth.

Shutai Feng:This is called 'absolute benefits' in professional terminology. Our Chuyang Investment also adheres to the absolute return philosophy, which is 'better to earn less than to suffer significant losses.'

Zhu Ning:Professor Shiller has a book called 'Narrative Economics,' where 'narrative' refers to a sudden formation of a prevailing viewpoint in the market. For example, there was a time when we believed housing prices would never fall, but recently, young people believe housing prices will never rise again, and this has occurred in just two to three years, the same goes for the stock market. There is a gradually amplifying process in social opinion and psychology, where individuals may yield to herd mentality, thinking that if everyone says this, then I should do the same. I believe this also relates to personal independent thought, or what is referred to as'critical thinking' ability, which is very important in investing. People often say, 'You can't earn money outside your understanding,' but that is indeed the case. Sometimes greed and fear are just a line apart,some can make the right choices, but many people make the wrong ones.

Shutai Feng:Therefore, investing requires acquiring information, but first, one must discern the authenticity of this information and resolve it with independent thinking. This is also a very important point made by Professor Zhu, a crucial tool for breaking the spell of excessive pessimism.

Zhu Ning:Yes, I often share with investors that if I could help them correct one mistake to maximize investment returns, it should be learning to cut losses, especially in a bear market. However, I also believe that everyone should maintain long-term confidence and faith in investing. The author of "The Black Swan," Taleb, wrote a new book called "Asymmetrical Risks," where he states that life's greatest risk is not taking risks. I don’t mean to say everyone should go all in right now, but many investors in a bear market can feel overwhelmed by the market situation. There's a saying in the market, "If you don't manage your finances, your finances won't manage you." If managing finances does not make money, then not managing finances might make it even less likely to earn money. If you completely don’t want to take risks, then you can only accept the continually decreasing interest rates on bank deposits.

Shutai Feng:I agree with Professor Zhu's judgment. Most people actually don’t like the decline in stock prices, but Buffett, as mentioned earlier, somewhat welcomes the adjustment in stock prices.

Zhu Ning:This is also a distinctive point about Buffett; he never considers holding Cash a waste. However, many retail investors think holding Cash is wasteful. If there is $0.1 million in an Account, they must invest the entire $0.1 million into Stocks to feel secure, without realizing the "opportunity cost" mentioned in economics, which means every dollar has its opportunity cost. By buying this stock, it may decline, and they cannot buy other undervalued Assets.

Shutai Feng:I remember that Buffett had certain requirements for himself; he initially stipulated that he should have over $20 billion in Cash or cash equivalents, and later increased it to $30 billion. In recent years, he has had over $100 billion in Cash. This is the money he used to buy the dip during stock market crashes, which actually increased his returns.

Zhu Ning:Another thing that particularly moved me was when he said: "You must not try to earn all the money in the market." There are certainly people in the market who can trade Cocoa Futures to make money, but that's not suitable for me because I don't understand Cocoa at all. So he also mentioned buying things that you are familiar with. If you don't understand something and still want to make money, you might enter a risky area that you are unaware of, and in the end, you might lose money. Therefore, we need to understand our limits and acknowledge that everyone has their own expertise, but not everyone earns all the money in the market.

Shutai Feng:This is his "Circle of Competence Principle," buying Stocks without stepping outside one's own circle of competence. Just now, Professor Zhu mentioned that you visited Buffett. We know that it's quite difficult to meet Buffett; what was the opportunity that you had to see him? What was your immediate impression of him?

Zhu Ning:It was actually quite an interesting experience. In 2007, another professor and I took more than 40 MBA students from the University of California to visit him. He invites certain schools or accepts applications from schools every year, welcoming students to visit the headquarters of Berkshire Hathaway Inc.

I have three immediate impressions of Buffett. The first is that he is really healthy. When we visited him, he was about seventy-eight years old and stood for an hour and a half to talk to us. Second, he is indeed very good at telling stories; everyone was completely focused on listening to him share. Third, he truly cares about education and young people; he is a very approachable person. That time he also invited all of us to the steakhouse where he dines with Bill Gates; I even got to ride in his car. So, I think he really enjoys what he does, and now it may not necessarily be for money, but because he believes in doing things that he finds valuable and interesting, which aligns perfectly with Munger.

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(4) What psychological misconceptions lead us to being stuck in investments?

Shutai Feng:We just discussed the selling phase in the "three phases of investment"; the second to last phase is called the flat phase. This occurs in the early stages of a bull market adjustment when stock prices begin to fall. Many investors do not take appropriate investment actions to adjust but instead choose to lie flat, closing their Accounts and not looking at them anymore, which means they do not stop losses. I would like to further discuss with Professor Zhu Ning why we choose to lie flat during stock market adjustments and what deeper cognitive misconceptions exist. How can we crack this from a methodological perspective?

Zhu Ning:Some people buy a stock at 10 yuan, and when it drops to 8 yuan, which is commonly referred to as having an unrealized loss, they forget the original intention of investing. Originally, entering the market to buy stocks was for making money, but when in the unrealized loss stage, the investment goal suddenly shifts to preventing losses, breaking even, and getting out becomes the most important goal of the entire investment. This comes from a very deep behavioral aspect of human evolution, calledloss aversion. People are very reluctant to face losses, whether material, financial, or psychological and emotional, because they do not want to acknowledge their mistakes.The stock price may have fallen, but if one does not stop losses, there might be a day when they break even, leading to a psychological satisfaction that at least they didn't make a mistake by buying the stock and didn't lose money.

This is a very deep issue reflected in investments: first, among stocks with unrealized gains and losses, investors are always very willing to sell stocks with unrealized gains; second, regrettably, this often means that profitable stocks are sold too early and are not held, while losing stocks that should be sold are held onto; third, more critically, when losses reach a certain extent, investors may develop the "ostrich effect," not checking their stock accounts, and later forgetting the existence of that stock altogether. Behavioral economics research in Finland found that during a bull market, investors check their stock accounts on average once a day to see if they have made money and how much; during a bear market, investors check their accounts less than once a week.

This also indicates that changes in the overall market environment have a significant impact on investors' attitudes toward investing. As Tai Feng mentioned earlier, it is actually during downturns or adjustments that you find the best opportunities to reallocate and reposition because, at that time, not only do the prices of poor stocks decline, but good stocks also fall. However, this valuable investment opportunity often leads to investors completely losing confidence and becoming indifferent.

At this point, one should reflect on why these stocks were bought in the first phase. Self-criticism is never an easy task, but it is crucial for becoming a good investor. This ability for self-reflection, I believe, is an indispensable quality for becoming a successful and excellent investor.

5. The dangers of overconfidence in investment.

Shutai Feng:Now, let's return to the first stage of losses in stock market investment, where behaviors of chasing gains occur during the optimistic period of the bull market. What cognitive biases lie behind this? How can we resolve it from the perspective of behavioral finance?

Zhu Ning:Our extensive academic research shows that individual investors (or referred to as retail investors or novices) often perform relatively well compared to the market in bear markets, while they significantly underperform during bull markets. This phenomenon is consistent across almost all major Capital Markets globally. It's an interesting observation, as profits can only be made in bull markets, and it suggests that during a bull market, directly tracking the market by buying an index may yield better results than most retail investors selecting their stocks.

We just discussed learning to sell when the market environment changes and learning to buy when the market is unfavorable, but I think it is even more important not to enter the market in large amounts at high points.There is a joke in English that says investing is quite easy, it's just about 'Buy low, sell high', but most investors end up 'buying high, selling low'.

To get to the root of the problem, I think there are three reasons: First, like panic selling, the process of chasing trends also reflects a linear thinking pattern in humans. A novice sees that a stock has risen by 30% in the past six or three months and thinks it must be a good stock, so they go ahead and buy it. They often do not consider what mechanisms are behind the stock market, failing to realize that the higher the stock price rises, the greater the likelihood of market adjustments becomes under unchanged information, and the larger the potential for a downturn.

Second, many investors are overly confident in their investing abilities and sources of information. Some retail investors buy stocks simply because they know a friend who works at that company, because they are familiar with that industry, or because they use the company's products. These superficial reasons do not offer individual investors any serious opportunity to analyze or understand the company's inner workings.

Third, there is the herd effect. When the market is surging, everyone is very passionate. For instance, during 2015, some predicted 5,000 points, others 8,000 points, and some even said it could reach 0.01 million points. When it eventually reached 5,000 points, the market was about to start adjusting, yet many investors still believed it could double. This mutually reinforcing group psychology greatly influences investor behavior and choices.

Shutai Feng:In the history of investing, are there any typical stories about overconfidence or the herd effect that can be shared?

Zhu Ning:In 1929, there was a massive stock market crash in the United States, resulting in the bankruptcy of thousands of Financial Institutions, which directly led to the Great Depression from 1929 to 1933. At that time, a successful Jewish investor named Baruch (the Baruch College of the City University of New York is sponsored by him) made a particularly insightful remark: 'When beggars, hairdressers, and shoeshine boys are teaching you how to invest, it definitely means the market has topped.' This was because, after experiencing rapid economic development in the 1920s, American society developed a frenzy mindset, to the extent that economic historians often refer to the 1920s in America as 'The Roaring Twenties'. Professor Fisher of Yale University also claimed that the stock market had reached a 'permanent high', but he later admitted he was wrong. Professor Fisher was a pioneer of monetary theory, yet he ended up nearly bankrupt during this stock market adjustment. I think this reflects another saying among investors: don't go where there are too many people. When trading is very crowded, and everyone believes that stocks will rise, it often indicates that a turning point is imminent.

还有一个类似事件是08年的全球金融危机。06年席勒教授已经写了很多的专栏和书，比如《非理性繁荣》说美国的楼市已经进入过去150年以来从未见过的高昂的估值水平。那时出现了一种很奇怪的情况：一个人没有工作、没有收入、没有资产，走进银行大摇大摆就说我要贷款买房子，银行也真的直接给他办了房贷买房子，甚至有的房贷是零首付的。为什么会这样呢？因为在当时整个美国经济，人们不认为房子会下跌，银行觉得如果你供不起房子，那断供之后，房子归我，没准还能靠这房子赚一笔。这也反映了整个市场和社会情绪，所以股市中散户的行为可能是最可靠的逆向指标。

我觉得很多国内的散户朋友其实根本不知道他们在股市里赚的这个钱是从哪赚来的。他只觉得是从市场里面赚出来的，但没意识到这些在金融市场获得的收益一定会和风险有关。既然和风险有关，就意味着你可能会有损失，你在投资的时候不能只想着收益，完全不考虑损失。这是一个根本的问题，在买任何一个股票的时候，都必须要问问自己它的风险在哪里，对它的认识是否充分。

很多散户的目标都是想要跑赢大市、多赚钱，但残酷的是，全球主要资本市场的实证大数据结果显示，在所有的散户人群里，只有不到10%的散户是可以比较持续地跑赢大盘，有一半以上的散户是比较持续地跑输大盘。那为什么大家还趋之若鹜地去交易呢？恰恰是因为我刚才讲的过度自信，所有投资者都觉得自己是那不到10%可以持续跑赢大盘的投资者，但现实是大部分的人都会被整个市场教训。所以从这个角度来讲，散户投资者们还需要更加客观的评判有没有金融素养，有没有丰富的投资经验，有没有特别的分析方法，或者特别的信息来源？如果没有的话，我觉得你要问一问自己为什么能够比那些一周7天、一天24小时，每天睡觉都在想怎么赚钱的基金经理做得更好？

（六）投资中为什么需要多元化配置？

Shutai Feng:我也在朱教授的书里看到过度自信有很多的表现，集中持股是不是也是过度自信的一个表现？

Zhu Ning:Yes, the most I teach in the entire field of investment is called diversification. Perhaps everyone has heard of this Concept, but we still find that many retail investors either do not diversify their investments, or the methods they use to diversify are incorrect, or they feel that they do not need to diversify at all. Some people believe that diversification disperses risk and lowers returns, but in pursuit of higher returns, they think they cannot disperse their funds and must concentrate them. However, I believe many students fail to realize that diversification is not to help you achieve higher returns, but precisely to avoid drawdowns or losses. There are also those who think their information is the most accurate and the stocks they buy are the best. But with diversification, you will find that there is always a place to make money, which can help share some of the risks.

We also see many incorrect or overly simplistic approaches to diversification. Some friends believe that diversification relies on the number of assets, rather than on the low correlation between the entire Assets. Therefore, what we discuss regarding diversified investment is more about diversified asset allocation. Because each major asset class has its own risk and return distribution, and they do not have high correlation with each other, placing them in an investment portfolio can effectively reduce risk and volatility.If you buy 10 stocks but they are all Technology stocks, it doesn't matter how many you buy; if the Star drops one day, all your stocks will be impacted. This indicates a too strong correlation.

Shutai Feng:Speaking of diversification, I actually have another question I want to ask. From a theoretical perspective, diversification makes sense, but Buffett seems to have a somewhat different view on diversification. He has even said many extreme things, such as 'You should put all your eggs in one basket,' and 'Diversification is a protection against ignorance.' How to understand the contradiction between the academically discussed diversification and the views of Buffett, such a stock god?

Zhu Ning:In fact, these two are not contradictory. Ifyou believe you are Buffett, I would also suggest and support you not to diversify. However, as we just mentioned, most people think they are Buffett, but in reality, they are 'Jiu Fei Te', just a bit off.Secondly, there is a background to Buffett's statement. We just mentioned that Buffett adheres to the investment philosophy of "be fearful when others are greedy, and be greedy when others are fearful." The reason he dares to concentrate is that he knows that he will definitely not lose money when buying this stock. If you also use this standard to evaluate your investments, and there is a 100% guarantee, then I also agree that you can avoid diversification. However, we have to consider that Buffett does not trade very frequently. If he does not see good stocks, he chooses to hold Cash / Money Market, waiting for good stocks with high certainty before fully committing. Retail investors, on the other hand, often do the opposite; they trade very frequently, lacking full confidence in their judgement and often deciding whether they made a good stock investment based on stock price fluctuations. Therefore, I believe that only by overcoming these shortcomings can one forego diversification.

Additionally, many individual investors do not realize that professional investors genuinely devote themselves entirely to investing and achieving excess returns. Setting aside the complexity of investing itself, from the perspective of time and energy, amateur investors find it difficult to compete with professional Institutions and professional investors.

(VII) Investing requires discipline and long-term thinking.

Shutai Feng:Are there any other knowledge points that Professor Zhu can share with everyone?

Zhu Ning:I think there are two points. The first is that domestic investors particularly like to chase hot topics. This is not entirely the same as chasing rising and falling stocks; chasing rising and falling stocks is based on the previous performance of the stocks, while chasing hot topics is completely influenced by news. Many retail investors find that when others buy something, they also buy it, buying whatever stock comments or public accounts recommend. However, they may not realize that when they see these "news" articles, they have already become "old news," and the stock prices have already adjusted. If you only see this news one or two weeks later, the stock price not only has risen but might have also overshot, leaving almost no room for further increases and a significant potential for decline. More worryingly, in an imperfect market regulatory environment, some malicious investors may deliberately create these messages to attract your attention and make you their backer. They might even artificially drive the stock price up, thus altering your judgement of future trends. Therefore, I hope everyone has the discipline not to follow the crowd.

The second point I want to remind everyone of is to have a relatively long investment plan. Many retail investors might go all in when buying stocks, hoping to make a big profit in one go. This is an investment philosophy that no investor should have. Of course, this doesn’t mean that no bets can be placed at any moment; rather, it should be sufficiently long-term to ensure that one is not left without ammunition when investment opportunities arise in the market. Therefore, I hope everyone diversifies not only when selecting stocks but also when choosing timing.

Shutai Feng:This is what long-term thinking is about. Is there a specific quantitative indicator for what is considered 'long-term'?

Zhu Ning:Each market is different, and each person is different as well. I believe a more useful criterion is to visualize the investment symbol and the goals. Instead of directly thinking about how much money to make, like 1 million or a small goal, think more about what this money will be used for, such as buying a car in five years. From this perspective, consider how much money is needed, and to acquire this wealth, how high should the returns be each year based on the current principal? How aggressive should one be? We must recognize that the more aggressive one is, the greater the risk of losing money.

Therefore, investing is a highly personalized activity, and no two people have the same investment goals, risk tolerance, or time horizon. Everyone must seriously engage in solo searching to reflect on what kind of investment strategy and choices they really need.

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