A Decade of Investment Regret: Brothers, if I Could Start Over, These Are the 10 Golden Rules I Would Live By

Today, let's not talk about the crypto world but about the US stock market. When the Nasdaq index posted a 28% decline in 2022, countless investors woke up to a painful realization: the true essence of investing is never found in the thrill of chasing gains and avoiding losses, but in those overlooked underlying logic.

Looking back at the ups and downs of the capital markets over the past ten years—from Bitcoin's wild swings to Tesla's rollercoaster valuation—so many have verified a simple truth with real money: if only I knew these lessons earlier, I might have avoided 90% of the detours.

The following ten investment principles are not only a review of past lessons but also survival guides through market cycles. Each one has stood the test of financial theories and market data.

1. Continuous learning is the only weapon to combat cognitive bias

Benjamin Graham, the founder of modern investment theory, once said, “The greatest enemy of the investor is himself.”

Many brothers are aware that cognitive gaps directly determine performance; this is vividly reflected in data. The Morgan Stanley 2023 Global Investor Behavior Report shows that investors who spend more than 3 hours weekly on investment knowledge gain an average annualized return of 6.2 percentage points higher over ten years than those who do not study.

From the three forms of the Efficient Market Hypothesis to behavioral finance’s anchoring effect, from the DCF model of company valuation to Porter's Five Forces industry analysis, every bit of knowledge acts as a filter to screen out investment noise.

Excellent investors do not rely on luck but transform market uncertainty into controllable certainty through continuous learning.

2. Leverage amplifies gains but also accelerates risks

The finance principle that “risk and return are positively correlated” never includes the variable of “leverage.” Leverage, at its core, is borrowed capital that magnifies positions. While it can boost potential returns, it also causes risk to grow geometrically.

In March 2020, when the US stock market triggered circuit breakers due to the pandemic, Goldman Sachs data (April 15, 2020) showed that investors using 3x leverage to short the S&P 500 lost over 85% of their principal within just ten trading days—far exceeding the 12% decline experienced by unleveraged investors.

Leverage is like a double-edged sword: when the market moves as expected, it can rapidly increase profits; but once the trend reverses, margin calls and forced liquidations can push investors into despair.

For most people, abandoning leverage is not conservative but the most basic protection of principal.

3. Costs are the hidden killers of compound interest; low fees determine long-term gains

Compound interest is the eighth wonder of the world, but high fees erode its foundation like termites. According to Vanguard’s research (November 20, 2022), a actively managed fund with an annual fee of 1.5% over a 30-year period will yield 42% less than an index fund with a 0.15% fee—meaning a difference of hundreds of thousands of dollars on a 100,000 yuan principal.

Fee damage stems from the “inverse effect of compound interest”: every management fee and purchase charge deducts from the principal, funds that could have generated new returns.

Whether choosing index funds, ETFs, or active management products, investors should pay close attention to fees—management, custody, trading commissions, and other hidden costs often have a greater long-term impact than short-term performance fluctuations.

4. Not understanding is the safest margin of safety

“Margin of safety” is at the core of Graham’s investment philosophy, and “knowing the asset” is the prerequisite for building that margin. When the cryptocurrency bubble burst in 2021, Ark Invest data (December 8, 2021) showed that over 62% of Bitcoin investors could not clearly explain the basic principles of blockchain. These “bandwagon investors” suffered an average loss of 73% during the subsequent crash.

Investing fundamentally involves judging an asset’s value. If you cannot understand a company's business model, profit logic, and industry competition landscape, what you call “investment” is just blind speculation.

The real margin of safety does not come from falling prices but from deep knowledge of the assets—only when you can clearly explain the investment target to others do you qualify to enter.

5. Let winners run, only then can you capture long-term compound growth

Behavioral finance’s “disposition effect” points out that investors tend to sell winning assets too early and hold losing ones too long, leading to the “small gains, big losses” dilemma.

Morningstar data (September 5, 2023) shows that over the past decade, the top 20% of stocks in the S&P 500 contributed 90% of the index's gains. Investors holding these stocks for over five years earned three times more than those holding them for less than a year.

The growth of excellent companies is a long-term process. Apple’s stock price increased more than 400 times from 2003 to 2023, with 80% of that increase coming from investors holding over ten years (Bloomberg, August 10, 2023).

Investing is not “hunting,” but “planting trees”—finding high-quality saplings and patiently waiting for them to grow into towering trees is the key to earning excess returns.

6. Bottom-fishing and topping out are false propositions; short-term fluctuations are irrelevant to long-term value

Market unpredictability is a fundamental consensus in finance. Trying to precisely predict market tops and bottoms is essentially fighting against the “random walk theory.”

Yale economist Robert Shiller’s research (June 30, 2022) shows that over the past 50 years, none of the 10 major market bottoms or tops in US stocks were accurately predicted by any fund manager three times in a row.

Short-term prices are heavily influenced by emotions, capital flows, and policies, making them highly random; but in the long run, asset prices will revert to their intrinsic value.

The 1987 Black Monday crash saw a 22.6% decline, yet the S&P 500 still rose 2.03% that year; after the March 2020 circuit breaker, the index rebounded over 60% within a year (Federal Reserve Economic Data, March 1, 2021).

For investors, abandoning obsession with short-term timing and focusing on the long-term value of assets is a more rational choice.

7. Invest in quality companies, not chase short-term hype

The core of “value investing” is investing in “companies that continuously create value,” not chasing fleeting hot stocks.

Harvard Business School’s research (May 18, 2023) shows that over the past 20 years, US stocks with a “ROE (Return on Equity) over 15% for 10 consecutive years” had an average annualized return of 18.7%, far exceeding “hot companies with top 10% quarterly earnings growth” (average annualized 8.2%).

The value of quality companies comes from stable profitability, deep competitive moats, and sustainable growth models—traits that are not affected by short-term market sentiment.

During the 2008 financial crisis, leading consumer giants like Procter & Gamble and Coca-Cola saw short-term stock declines, but their stocks rose an average of 120% over the next five years (S&P Dow Jones Indices, October 25, 2013)—true investment opportunities always lie within companies that stand the test of time.

8. Independent research is key to avoiding herd mentality

“The herd effect” is a common trap in capital markets, and independent research is the only way to avoid blindly following the crowd.

During the 2021 GameStop short squeeze, JP Morgan data (February 20, 2021) shows that investors who did not perform independent research and simply followed social media buy signals suffered a loss rate of 91%, while those who analyzed company fundamentals and set stop-loss orders only lost 18%.

Investment decisions should not rely on analyst reports, social media tips, or “insider information,” but on reading financial statements, analyzing industry data, and researching business models to form your own judgment. Revenue structure, gross margin changes, and cash flow in financial reports often reveal more about a company’s true situation than short-term earnings forecasts; industry competition and technological trends matter more for long-term asset value than hot topics.

9. Simple strategies outperform complex models; focus on your circle of competence for sustainable profits

The “Occam’s Razor” principle applies in investing too: the simplest strategies are often the most effective. Ray Dalio, founder of Bridgewater Associates, once said, “My investment system’s core is an ‘all-weather strategy,’ which in essence is diversified investments across stocks, bonds, commodities, etc.” Complex quantitative models and hedging strategies require specialized knowledge and are prone to overfitting, leading to failure.

A Barclays report (July 12, 2023) shows that over the past five years, a simple “60% stocks + 40% bonds” balanced approach yielded a risk-adjusted return (Sharpe ratio) 0.38 higher than strategies using more than five derivatives.

Investing doesn’t require advanced math models or complex financial instruments; focusing on what you understand—whether consumer, tech, or healthcare—within your circle of competence helps avoid the trap of “not doing what you understand and doing what you don’t.”

10. Use Mr. Market’s irrationality to your advantage—contrarian investing in high-quality assets

“Mr. Market” is Graham’s classic metaphor: the market is like an emotionally unstable gentleman, sometimes quoting high prices with optimism, other times giving low prices with pessimism. Smart investors do not let market sentiment sway them but use irrationality to find opportunities.

In 2022, Federal Reserve rate hikes triggered market panic, with the S&P 500 dropping 19.4%. At that time, BlackRock data (December 30, 2022) showed that investors willing to buy high-quality tech stocks that month enjoyed a 42% rebound in 2023—far surpassing the 18% average return of those who stayed on the sidelines.

Contrarian investing’s core is not just “fear when others are greedy,” but rational decisions based on value judgment—when high-quality assets are undervalued due to market sentiment, it’s the best time to buy.

But contrarian investing requires courage and patience. It demands sticking to your judgment during market pessimism and holding your position when others question you. This persistence ultimately translates into excess returns.

Investing is a marathon spanning decades; short-term ups and downs are just scenery along the way. What truly determines the finish line is correct cognition and steadfast execution.

A decade of regrets cannot be undone, but awakening now can change the future—by internalizing these lessons into your investing habits, every market fluctuation will become a stepping stone toward brothers’ financial freedom.