Source: Qile Club

1

Outstanding enterprises and investors share similar characteristics, which lie in their continuous progress and widening the gap with competitors in terms of capabilities. Looking at companies over a five-year horizon, top performers emerge from an initially even playing field to stand far ahead. Similarly, looking at individuals over five years, those who excel climb multiple rungs, with their knowledge and competence charting a trajectory akin to that of a high-performing stock.

Over the long term, investment returns in the stock market depend on comprehensive capabilities. The market is not only efficient at reflecting corporate value but also equally effective at reflecting the abilities of investors. The tragedy for retail investors lies in perpetually reversing cause and effect, always fantasizing about high returns without ever building the foundation necessary to achieve them. After n years, they remain stuck in place, wasting their lives in self-deception and trapped in cycles of impatience and regret.

Value investing is a rigorous and systematic methodology, not mere empty motivational rhetoric. Long-term holding is a rational choice driven by compounding, not a safe haven for fraudsters. Investment mastery is the natural outcome of prolonged learning and practice, not a mystical or esoteric spiritual endeavor. Avoid oversimplifying what is inherently complex, and do not overcomplicate what is naturally straightforward. This reflects both an individual’s investment insight and the lifelong self-discipline required in this profession.

2

In the 'Business Code' by Fan Li of the Spring and Autumn period, it was noted, 'One should be able to stay devoted to their trade; hating the old and chasing the new is a major taboo in commerce. One should understand opportunities, buying and storing according to timing, earning recognition as wise. One should plan for the long term, balancing abundance and scarcity, taking moderate action.' These principles align perfectly with key aspects of investing: focus and simplicity, sensitivity to the interplay between risk and opportunity, and maintaining a forward-looking perspective. It is evident that the fundamental principles for business success have remained consistent throughout history. The challenge lies in truly understanding these principles and resisting the allure of distractions while remaining steadfast.

There are two tragedies in investing. First, the belief that one single investment method can solve all problems and explain all phenomena, rejecting other approaches or perspectives as inferior. Second, the endless quest for a perfect investment method, failing to recognize the inevitability of trade-offs, leading to indecision and constant second-guessing. The first type of person becomes a dogmatic zealot, quick to criticize the market and proclaim themselves as the arbiter of truth when things go awry. The second type becomes a perpetual fence-sitter, never able to commit firmly to any decision.

Characteristics of future high-growth stocks include initial operations shrouded in uncertainty, with the market unclear about their business potential and competitive advantages. However, as the company gradually enters a phase where its strengths become apparent, its performance consistently exceeds expectations. Alongside this, its competitive edge and growth potential become increasingly visible, prompting market valuations to shift from frequent discounts or parity to sustained premiums. A long-term double catalyst is thus achieved.

While much has been said about the reasons for investing in future high-growth companies, it is equally critical to recognize the importance of investing in a future high-growth nation. Companies in the early to mid-stages of leveraging their strengths may lack the dazzling performance, refined regulations, and pervasive sophistication of great enterprises. However, for investors with insight and foresight, such companies offer a long runway for growth. The same principle applies to nations.

Some companies appear so effortless to operate during favorable conditions that even a novice could seemingly generate profits. This is akin to how even amateurs can make substantial gains during a bull market. While a 'moat' is undoubtedly valuable, pushing the concept to extremes can lead to dangerous fixation. In the business world, the principles of 'finiteness' and 'mean reversion' are unforgiving realities. Assessing a company's medium- to long-term operational outlook is a complex yet crucial task.

3

The domestic discourse on value investing often displays aversion to the 'uncertainty of innovation and development.' Indeed, some businesses remain unchanged for decades, but this does not imply that their value proposition remains static or perpetually in its nascent state. While the business model may stay constant, factors such as internal and external drivers, growth elasticity, and the potential for replication cannot remain stagnant. A company’s intrinsic value, much like the lifecycle of human beings, undergoes stages of birth, growth, decline, and death.

An interesting perspective suggests that while China's reforms are certainly eye-catching and imperative, what is often overlooked is that a significant number of countries around the world are also under pressure to reform. Many nations have encountered bottlenecks or even predicaments on their existing paths. Whoever can make decisive moves first and demonstrate strong execution capabilities will gain a competitive edge in the next phase. Perhaps the international landscape 30 years from now will depend on who acts with greater resolve today.

"Achieving steady returns" is a safe statement, but unless one already has a substantial base, the so-called "smooth annual return of 20%" neither meets financial goals nor holds realistic potential. Achieving a compound annual return of 25% over the long term is indeed extremely challenging. However, another characteristic of investment returns lies in their significant "irregularity." Recognizing the causes and implications of this irregularity is key to improving the probability of success.

In fact, given the principle of compound interest, yield does not need to be rushed. As long as no major mistakes are made and one persists in doing the right things, favorable returns are merely a matter of time. The greatest fortune for investors lies not only in making money but also in gaining time—never wasting time on disliked activities and freely arranging pursuits of interest. Letting money serve life, rather than life serving money, is the most precious aspect of investing!

If a pig flies in the sky for too long, it might start believing it has invisible wings. In reality, it is simply because the wind has not yet stopped. In this world, there is no smarter way to gain some fame than to stubbornly stick to one direction, as you will eventually be proven right, perhaps for a very long time. However, there is no more foolish approach to becoming a wise investor than this.

4

Many people like to emphasize that "investing is simple." Of course, if the tedious processes of data collection and analysis are omitted, the step-by-step business logic during analysis is not discussed, and the extensive thinking processes and continuous progress through discussions are not shown, presenting only the final result and a general rationale, then it may indeed appear "simple."

Most people tend to focus on the differences in outcomes, with many lamenting unfairness or bad luck. However, examining the process leading to these differences would likely provide much clarity. Take investing as an example: comparing the books read, thoughts written, and diligence demonstrated by top investors, it is estimated that 99% of those who fail would feel too embarrassed to comment on such disparities. Without self-reflection, no endeavor yields positive results.

Making mistakes in investing is inevitable; the difference lies in the level of errors. Ordinary mistakes, serious mistakes, and fatal mistakes can lead to vastly different financial outcomes. A series of ordinary mistakes often escalates into serious ones, while obstinately persisting in serious mistakes may result in fatal consequences. While the initial misstep might stem from professional factors, the ultimate disaster is usually rooted in personality traits.

A company's investment value is generally inversely proportional to the timeliness of information. For the most vulnerable companies, even minor industry news or policy shifts must be handled with care, as they could unexpectedly signal a major turning point. For average companies, at the very least, annual reports and related documents are crucial, as their absence makes it difficult to assess future operations. For the best companies, extreme cases aside, neglecting them for several years poses little issue—they always manage themselves well.

5

Generally speaking, I dislike companies that pursue "strategic transformation," especially those proposing changes due to visible industry downturns. Such companies typically lack foresight and rarely possess genuine strategies; they merely adapt to industry fluctuations. Capital markets tend to reward companies presenting attractive transformation prospects, but such high premiums should be approached cautiously, as they often become traps.

The dramatic ups and downs experienced by an individual in the stock market are inversely proportional to their learning value. The best investors' experiences (specifically referring to stock market experiences) should be the kind that bores audiences into yawning when made into movies. This aligns with the essence of Sun Tzu's Art of War: "A skilled warrior earns no fame for wisdom or bravery." Those who understand this should wisely avoid discussing their intense stock market battles or astonishing dramatic turns, as doing so only tarnishes their image.

Where there are people, there are江湖 (jianghu), and the investment circle is no exception. However, by comparison, this circle is much simpler. This does not mean that people in this profession are particularly pure, but rather that what sets this industry apart from most others is that performance is the ultimate criterion. Performance is something that cannot be boosted by mutual praise or destroyed by criticism.

High or low valuations are merely superficial phenomena; the fundamental differences lie in value cycles, business characteristics, and levels of certainty. Examining valuation differences over a specific period holds little significance, and the preference for premium or discount does not inherently reflect investment superiority. However, understanding the basic principles of premiums and discounts is essential to identifying 'mispricing.' Otherwise, one is bound to encounter either a growth trap or a value trap sooner or later.

For ordinary individual investors, their greatest advantages compared to institutions lie in focus and time. Ironically, these two aspects are often the most neglected by retail investors. Trying to dabble in everything and being impatient on a daily basis is enough to make even an intelligent person lose everything.

Beginners often view the term 'operating system' as mysterious and seek secret formulas like 'how many stocks to hold, how many tranches to buy in, or at what percentage intervals.' In my opinion, these are minor details that can be handled flexibly. Personally, I have both fully invested in a single stock and diversified across five or six holdings. I have spent a year and a half gradually building positions, while at other times I have made full purchases within a day. The key is not to dwell on the surface.

Over several years, there are actually few moments of significant operational importance. The critical point is to take decisive action when such moments arise; otherwise, it’s best to let the unimportant periods pass. Seeking opportunities arises from dissatisfaction. If the situation is satisfactory, non-action is the best strategy. But if dissatisfied, the emphasis should be on seeking opportunities, not merely executing trades. Aiming poorly makes even the most diligent trigger-pulling futile.

6

In the world of investing, discussing any isolated 'point' alone holds little meaning; otherwise, investing wouldn’t be so difficult. A moat does not equate to earnings growth, earnings growth does not equate to investment value, investment value does not guarantee favorable future prospects, long-term investment value does not ensure short-term price increases, and short-term gains do not validate correct investment logic... Only after untangling these confusions can one claim to have entered the realm of investing.

Which is more important: 'buying good companies' or 'buying at good prices?' Of course, both matter, but without understanding what 'good' means, one cannot buy good companies or secure good prices. Aren't those who 'always find things expensive' in this predicament? Reflecting back, even super-performing stocks often appear undervalued at some point, sometimes remaining depressed for years. Where were those 'always expensive' proponents then? Price certainly matters, but priorities must not be inverted.

I am not dismissing the approach of prioritizing low prices as an investment method; there are many ways to profit in the market. However, I personally choose to grow alongside excellent companies because I prefer to live in the sunlight. Constantly wrestling with subpar companies is exhausting and frustrating. Since the market allows free choice, why not opt for joy? If investing entails daily struggles amid deceit, suspicion, and cunning, I’d rather not invest at all.

At the end of each year, I hardly recall any memorable daily K-line charts. Any dramatic trading day appears subdued at the weekly level, negligible at the monthly level, meaningless at the yearly level, and utterly insignificant over a five-year horizon. For investors focused on corporate operations, perhaps the most unforgettable days in their investment memories are unrelated to trading.

Investors often talk about finding companies they truly understand, which means clarifying their circle of competence. However, many fail to clearly define what qualifies as 'competence.' Often, people only recognize their accuracy after seeing actual earnings growth or significant stock price increases. Before systematically understanding what constitutes a circle of competence, hastily confirming so-called abilities may be more dangerous than having no ability at all.

Many investment aphorisms like to talk about realms of mastery, but I believe that such discussions should be approached with caution. It is not because the concept is unimportant, but rather because discussing realms without a solid foundation is futile. The path of investment can be filled with grandiose talk, but ultimately, it requires steady, incremental progress. One can make money without a profound realm of understanding, but lacking basic knowledge and methodology could lead to significant losses. Realms of mastery are ultimately the natural result of self-cultivation, character, and values—this cannot be rushed.

7

For those engaged in real enterprises, all energy should be focused on 'how to improve the business.' However, for investors, more thought should be given to 'what constitutes a good business.' Entrepreneurs need to find the most effective path and the most capable individuals within their industry to accomplish a venture, while investors aim to benefit from the best businesses and the fruits of entrepreneurs' labor. Investment provides choices that would otherwise be impossible, and we should be grateful for and make good use of this opportunity.

When selecting stocks, I have a somewhat unconventional approach: I look at who my fellow shareholders are and who the opposing camp consists of. At times, I may not have strong feelings about certain companies or timing, but the general investment acumen and level of the company's supporters serve as a useful reference. If you discover that the company you favor is followed by a large group of inexperienced investors, this is not a good sign.

The advancement of capital market system reforms may introduce new strategies in the future. However, for me, it makes little difference. My investment methodology does not require any updates to stay relevant. This is because the principles by which companies create value are not altered by securities regulations or new tools. In fact, I observe that capable individuals have already succeeded without relying on such things, while those who do not understand fundamental principles will still fail despite the availability of new strategies.

In industries, technology, or even the investment world, there is a near-universal rule: those who most enjoy writing lengthy articles in the media offering advice or are most enthusiastic about giving lectures often have subpar performance in their fields. They may excel at capturing attention and presenting clever arguments, but the companies or products they oversee are typically mediocre at best. Media darlings are often unrelated to truly outstanding achievements.

In life, loneliness may be an unavoidable condition. However, in investing, solitude is a quality. Loneliness can be alleviated by socializing and indulging in entertainment, but solitude calls for a resonance of like-minded spirits. Solitude is a common state in investing, and transitioning from enduring solitude to embracing it reflects both maturity and habit. It brings inner peace and clarity of thought, with profitability being merely a byproduct.

8

Wealth should bring us peace and freedom, offering independence and greater choices. However, wealth can also cause one to lose sight of its original purpose during the pursuit. When the chase for wealth supersedes the meaning of life itself, the soul becomes captive, leading to restlessness despite apparent success. Ultimately, life ends with nothing more than a body laid to rest, and immense wealth cannot secure prosperity for future generations. Let go, and live freely.

When holding stocks, investors often face the dilemma of balancing short-term versus long-term interests. While the prospects of a portfolio may appear attractive over the long term, the short term (e.g., one year) might involve significant adjustments or underperformance relative to the market. At such moments, investors confront a philosophical question: which is more important, the future or the present? Providing any definitive answer would be irresponsible, but I believe the starting point for resolving this issue lies in whether the current position feels comfortable.

Breaking through the barriers of investment requires some degree of serendipity; turning investment philosophy into an effective methodology demands sustained diligence, and integrating key knowledge points while avoiding rigidity requires talent. Each of these three conditions eliminates about half of the participants, leaving approximately 12.5% after all three rounds. Therefore, it is entirely reasonable that only about 10% of participants in the stock market achieve long-term success.

The stock market is no stranger to absurdities, but this does not mean that everything one fails to understand is inherently absurd. The role of investors is to discern opportunities they can comprehend and manage from incomprehensible phenomena and risks they are unwilling to bear. That is all. Constantly labeling everything as bubbles or ridiculousness is the job of market commentators. We can choose not to participate, but there is no need to impose our standards and limitations as the sole truth.

This is an era filled with keyboard warriors and online moralists, where the pinnacle of pretentiousness is being moved by one's own performance. Browsing Weibo easily explains why most people fail miserably in the stock market—jumping to conclusions based on hearsay, being extreme, lacking self-control, devoid of critical thinking, always shirking responsibility, inconsistency between words and actions, narrow-mindedness... Whether it manifests as collective wisdom or a mob mentality depends on the quality of each individual.

In investing, finding the right person to discuss ideas with is essential, but avoid getting caught up in debates—debating aims to win over the opponent, while discussing focuses on identifying blind spots in one’s thinking; debating emphasizes tactics (e.g., evading key points, misrepresenting concepts, using emotional appeals), whereas discussion values substance; debating often starts with a preconceived conclusion and seeks justifications to save face, while discussion adopts an open-minded approach to achieve deeper understanding.

Successful investors typically possess strong strategic vision and are more inclined to contemplate issues that will decisively shape the long-term future. Ordinary people, on the other hand, tend to get overly excited by a single day’s surge in the market, ignoring the overall failure in outcomes. When someone considers problems over a 10-year horizon, they secure their future. If one only habitually thinks about tomorrow’s problems, they are destined to perpetuate the mistakes of yesterday.

A few major milestones in life: finding the right person in personal relationships, following the right leader in career, and identifying the right individuals in investment decisions. Getting one right provides a safety net. Missing one leaves regret. Getting all right brings radiant success. Missing all leads to unbearable misery.

Editor /rice