Source: Thought Stamp
1. As long as you don't sell when you're at a loss, won't you get "reaped like leeks"?
Many new investors come up to me and say, "I've only been trading stocks for a few months, and I've been making money the whole time. My strategy is to hold on whenever I'm down and sell once I've gained 10%. I really don't think stock investing is that hard—so why are all those other people always losing?"
Another similar remark comes from Hu Xijin: "As long as you don't sell when you're at a loss, you won't get reaped like leeks."
Although seasoned investors all know where the flaw lies in this approach, anyone who follows it will inevitably end up stuck with deeply trapped stocks, unable to move. This conclusion is easy to reach—just run a few simple scenarios on a piece of scrap paper.
But indeed, many people, when they first start trading stocks, have to run straight into that "brick wall" themselves—only after losing a substantial amount of money and time do they finally come to their senses. Even worse is Old Hu, who still doesn't know where he went wrong; just a few days ago, he was still saying, "Sell the ones that've made big gains and shift into the ones that are heavily in the red."
Many investment strategies that seem simple in theory are actually hard to stick with, because investors tend to overestimate short-term fluctuations, repeatedly trying ineffective approaches, while underestimating long-term trends and the transformative power of time.
These methods often harbor the trap of low-probability events, leading people to become overconfident.
Overconfidence is not a matter of personality but rather a fundamental aspect of human nature; most people exhibit it. Social psychology refers to this phenomenon as the "70% paradox," with numerous survey findings showing that, whether assessing driving skills, moral standards, or job performance, 70% of individuals believe they rank above the average.
This article will take stock of several tasks that seem simple but are actually quite difficult to accomplish.
2. Hold for the long term
Whenever someone asks me to verify a stock analysis, one common justification is: "If you were to hold it for the long term…"
I can't help but tell him, "Don't make long-term holding the cornerstone of your investment decisions."
What does it mean to "not treat XXX as a premise for decision-making"? For example, suppose you come across a very beautiful piece of clothing, but it's only suitable for wearing on a tropical vacation. In that case, the garment's attractiveness hinges on a low‑probability scenario and shouldn't be taken as an assumption when making a purchasing decision.
Investment decisions should not be based on the assumption that "you will find it difficult to do." Long-term investing is a natural outcome—a result of regularly reassessing your holdings over time. However, before making a purchase, you must assume that, in many scenarios, you will ultimately decide to sell.
Even if you remain fully confident in the company, the following scenarios could still prompt you to sell your holdings:
1. In urgent need of money
2. Doubts about the industry's prospects
3. Doubts about the market (national fortune) arise.
4. Discovering a better opportunity but selling because the portfolio is fully invested.
5. After riding the roller coaster a few times, I couldn't resist trying a high‑low‑catch strategy—only to sell at the peak and then lack the courage to chase back in at the top.
……
Many are low-probability events you'd typically overlook, but over a longer time frame, their likelihood of occurring increases significantly.
Your decision-making should be grounded in a more common scenario: when you identify a better investment opportunity, or lose confidence, or sell due to unforeseen circumstances, do you end up with a loss or a profit?
We should not only examine how Buffett bought and held Apple for the long term, but also explore why he gradually sold off his IBM holdings along the way. Judging from Buffett's responses at two shareholder meetings, selling IBM involved a degree of luck—Buffett needed to shift more of his portfolio into Apple—but it was also based on his assessment that IBM's competitors were growing increasingly formidable, prompting him to reassess his buying and selling decisions.
There have also been several instances of investing in and selling airline stocks. Many people view these as failed cases, but making money in investing doesn't equate to success if it causes you to pass up far more lucrative opportunities; likewise, losing money isn't necessarily a failure if it allows you to adjust your position to something better.
If you insist on making a long-term investment in a company as a condition you can reliably meet, you must satisfy the following criteria:
1. I'm in this industry myself and deal with this company every day, so I have complete confidence in it. Holding its shares long-term feels like having a job—earning salaries from two companies. Plus, if anything goes wrong with this company, I'll know right away.
2. I'm an employee of this company—actually, a core member—and I can get advance notice of certain matters compared to most people.
3. I'm neither in this industry nor with this company, but the Chairman is my father.
Of course, I'm not suggesting that only the scenarios mentioned above justify holding a company's stock for the long term; rather, I'm saying that only in these three situations should you treat long-term holding as a given.
All long-term investments are outcomes—goals, not prerequisites for decision-making. Especially in situations like the one below, so‑called "long-term holding" often amounts to nothing more than an excuse to avoid selling, to refuse to admit having misjudged the market, or simply to "not bother looking for other opportunities."
1. Although this year's performance has declined, the company's industry competitiveness (or other long-term factors such as its business model) remains strong. Every downturn is temporary; holding for the long term will surely yield returns.
2. The industry has been in a downturn for three years, and the stock price has fallen by 90%. It's highly likely to have reached a bottom, making it suitable for long-term holding.
3. The company's earnings decline is simply the result of its strategic transformation; if the transformation succeeds, it could easily become a ten-bagger.
It's like saying, "You've already improved from a poor student to the middle of your class; with sustained effort, getting into Tsinghua or Peking University is within reach."
I'm not opposed to "long-term holding"; rather, I'm saying that "long-term holding" isn't something you can achieve simply by sheer willpower. The notion that long-term investing will automatically make you money isn't learning from Buffett—it's the greatest insult to Buffett.
3. Sell high, buy low
As mentioned earlier when discussing "reasons for selling," one common mindset is that after riding the roller coaster a few times, you're likely to develop this thought: "Next time the price goes up, I'll sell; then I'll buy back in when it dips."
Buying low and selling high is also an illusion of "I can do it," typically arising in the following situations:
1. The price has been oscillating regularly within a narrow range for an extended period, and I'd like to try my hand at speculative trading.
2. After a prolonged decline, the strategy is to sell first and then buy to reduce costs.
3. When the negative factors are not material, it's best to temporarily steer clear of the downward trend.
Whether driven by stock price trends or fundamental factors, forecasting a short-term decline in share prices is highly unreliable. Under the following circumstances, a sudden sharp rally can occur even when fundamentals remain unchanged:
1. The broader market surged sharply.
2. The company has just announced positive news.
3. The industry has seen policy-driven themes emerge.
4. Influential sellers issue strongly bullish research reports.
5. Large speculative capital enters to drive up the stock price.
Whether a sell order is correct doesn't depend on whether the stock price will fall afterward; it hinges on your intended rationale for selling. If that intention can't be fulfilled, what's your plan of action?
Value investors can sell and switch to another stock when they identify a better investment opportunity—undoubtedly a sound strategy.
A skilled technical analyst, relying on trend analysis, may conclude that the probability of a near-term price decline is high and thus sell first—this can be a sound strategy. However, such a move requires a well‑thought‑out contingency plan: what if the stock doesn't fall but instead continues to rise? Under what circumstances should you keep waiting for a pullback? When should you cut your losses and re‑enter? And in which situations is it best to abandon the stock altogether?
There are also investment strategies that combine "active stock picking with quantitative techniques," which allow investors to sell positions they still favor—for example, ETF grid trading. In such approaches, selling is algorithmically executed, and corresponding countermeasures are in place for potential price rallies, flat markets, or declines following a sale.
Simply put, "sell high and buy low" is also just an outcome—it may or may not materialize—so it shouldn't be treated as a sell‑off target.
4. Copying homework
As a top-tier influencer who spends every day "copying others' homework," let me start with the answer: simply copying someone else's work will almost certainly result in an unsatisfactory outcome.
First, categorize the influential investors who recommend stocks to you into short-term traders and medium- to long-term investors.
Copying the trades of short-term‑focused top influencers will almost certainly lead to losses over the long run—if they're truly skilled at short‑term trading. The logic is simple: there's always a lag between the influencer's personal conviction and the moment they share their picks with you. Short‑term stocks typically rise sharply in the near term and fall more gradually over the longer haul, so during that window they're likely to be trending upward. If the gain averages two percentage points, it means you'll end up earning (or losing) two points less than the influencer each time.
Don't underestimate these two points: even seasoned short-term traders have a win rate of only around 60%, with gains and losses balancing out to an average expectation of just 0.5 points per trade. If they take one trade per week, that adds up to 25% annually. But if you simply copy their trades—when they earn 1 point, you lose 1 point—you'll end up losing 25% over the course of a year.
As for the stock recommendations of mid- to long-term influential analysts, this too stems from a lack of synchronization across cycles.
When others tout the fundamentals of XXX, they're usually talking about a medium- to long-term investment. You see that it makes sense and jump in right away—only to find that your entry price was already quite low, and you've been holding ever since. A few days later, when the price dips, everyone else spots the bargain and starts adding to their positions in small increments, while you can only grit your teeth and pile in to average down. But once you're stuck with a losing position, your mindset takes a hit; if the stock keeps falling, you snap, cut your losses, and just happen to hand the opportunity to those who are stepping up their buying.
A few more days pass, and the price keeps falling—how thrilled you are! You start boasting about how "pros" don't even measure up to you, and promptly delist it from your watchlist. A few months later, someone else suggests that XXX is ready for profit‑taking, but when you check, you realize its price has already doubled since your sell point.
Many people might wonder: since he's an expert, couldn't he wait until prices are cheaper before recommending them to me? The reality is that, in A‑shares, you often can't afford to wait for a bargain. Therefore, a good company at a good price isn't an absolute standard—it must be evaluated relative to the stocks you already hold. But everyone's portfolio is different, so such comparisons ultimately depend on your own understanding of individual stocks.
It's not just stock recommendations—many pitfalls arise from bad habits when following others' opinions. When reading the views of prominent investors, many people tend to cherry-pick isolated phrases or snippets that align with their own holdings, using them to reinforce their existing beliefs and only digging themselves deeper into the wrong direction.
In investing, there is no such thing as simply copying others' work—only learning. While copying once or twice might yield short-term gains, the notion that you can consistently profit by merely imitating without truly learning is nothing more than an illusion: "I can do this."
5. Dollar-cost averaging
The challenges of dollar-cost averaging are similar to those of "long-term holding": although DCA inherently assumes you're not counting on short-term gains, human nature still tempts us to dream of getting rich overnight.
Dollar-cost averaging has an even harder-to-maintain drawback than "long-term holding": the latter requires you to refrain from any trading. If you can truly stay away from the stock market, the odds of sticking to it improve significantly—for example, as many people have tried, by uninstalling the app and asking family members to change your account password.
Regular investment requires you to make contributions on a scheduled basis. Without an automatic deduction system, even if you only occasionally forget or abandon your plan—say, once in a while—the cumulative effect over hundreds of installments could mean missing several payments. Mathematically speaking, skipping a few installments might not significantly alter the overall outcome. However, in practice, things often turn out far worse than the math would suggest:
1. The missed installments in a systematic investment plan are often consecutive, and the more consecutive installments you skip, the more likely you are to abandon the plan altogether.
2. The few missed installment‑investment rounds often occur when losses are at their worst; their impact on the overall outcome is greater than that of other installments, making it all the more likely that investors will abandon the strategy.
3. If you miss a few scheduled investment installments and the market continues to decline, it's essentially a "reward" from the market—giving you an even higher likelihood of skipping the next installment, until you eventually give up.
4. After skipping a few scheduled investment installments, if the market reverses and starts to rise, you may feel that you missed out by not buying when prices were low, and even less inclined to chase higher prices when they climb—so you keep missing opportunities until you eventually give up.
5. When dollar-cost averaging encounters a prolonged bull market, after skipping several installments because you deemed the price too high, you may develop a habit of timing the market—something that can just as easily lead to giving up.
6. After starting a regular‑investment plan, if a bull market takes off and you see people who started later than you but end up earning more thanks to their lump‑sum investments, you may begin to doubt whether dollar‑cost averaging is a good idea—and eventually give up altogether.
The difficulty of dollar-cost averaging, like that of long-term investing or blindly following others' strategies, lies in repeatedly executing a simple task hundreds of times without a single mistake—while overlooking the fact that human beings are constantly changing.
It's like when a fitness coach tells you that if you just spend 20 minutes a day, you'll achieve this or that—or like how financial marketers tout compound interest: 10% annual returns, and in 50 years, $100,000 grows to over $11 million. No one's trying to trick you, and you're not at fault—you simply can't bring yourself to do it.
Editor: jayden