A decline of over 40%! Financial influencers act as "cheerleaders"—do not blindly believe in the myth of getting rich quickly! This is the stock market's "Don't" list.

The principle of investing is to prefer missing out over making mistakes.

Recently, hot stocks such as commercial aerospace, AI applications, and robotics have experienced a decline of over 40% since their peak. This means that if investors use leverage, chase high prices, and buy things they don’t understand, the combined effect could lead to financial disaster.

Some well-known financial influencers are the “cheerleaders” of this round of hot concept hype. On January 19, the Zhejiang Securities Regulatory Bureau fined and confiscated 83.25 million yuan from the financial influencer “Jin Hong” (real name Jin Yongrong); on January 20, Snowball Security Center permanently banned 22 active influencer accounts. Their “hype” game has crossed legal boundaries and should be punished, but investors’ wealth loss may be irreparable.

Stay away from anyone claiming they can make you get rich quickly—they are walking disasters. For yourself, if you use leverage, buy things you don’t understand, or chase high out of jealousy, investing will lead to disaster.

Investing requires avoiding all known negative lists; what remains can help achieve your goals better. Therefore, investors should list negative items and thoroughly avoid them. This is what Duan Yongping said: the most important thing in investing is not “what to do,” but “what not to do.” “What to do” is determined by your circle of competence; “what not to do” is the protective charm of successful investing.

Do not crave short-term wealth

Why do the opinions of financial influencers and various speculators attract readers? Because they deliberately tell a myth of quick wealth—some package themselves as “20 times return in one year and three months, from 300,000 yuan to 5 billion yuan,” others claim “earning 10% per month”… But ultimately, traffic becomes a harvesting scythe, and those chasing the trend unknowingly become high-position holders.

We must stay away from anyone claiming they can make you get rich quickly. Anyone who can do that is either lucky or a scammer. If someone has a secret to get rich fast, why would they tell you? Those packaged wealth stories are just to gain your trust and steal your money.

Pursuing quick wealth contradicts common sense in investing and is no different from gambling. Duan Yongping has repeatedly said that the fastest short-term operation is gambling—you might get lucky once or twice, but long-term gambling will surely wipe out all your assets.

Accumulating wealth takes time, patience, knowledge, discipline, and hard work. Be especially cautious of anyone selling you the dream of easy wealth. Munger once frankly said, stop pursuing quick wealth; it’s a one-way street crowded toward a cliff. Wealth is not a 100-meter sprint; it’s a test of psychological endurance. Wealth is not a numbers game; it’s a test of character.

Munger also said that a person pursuing quick wealth, once they have jealousy and arrogance, will leverage up. Now that they are fully prepared, they must do something—this “something” is frequent trading and seeking excitement. They think they are investing, but actually, they are entertaining themselves. They use their lifelong savings to buy the world’s most expensive thrill.

Seven mistakes to avoid

Pat Dorsey, founder of Morningstar, summarized in his book “The Little Book of Common Sense Investing” seven mistakes to avoid in investing. If you avoid these common mistakes, you will greatly surpass the average investor.

First, do not try to get huge returns by discovering the next Microsoft. Focus on finding reliable companies whose stock prices are below their intrinsic value. Small growth stocks are among the worst performers for long-term holdings; many small companies, besides burning cash, have done almost nothing, and many eventually go bankrupt. For example, from 1997 to 2002, about 8% of Nasdaq-listed companies were delisted annually, and shareholders of roughly 2,200 companies likely suffered significant losses before delisting.

Second, do not believe that “this time is different.” In capital markets, the most expensive lesson is “this time is different.” History repeats itself, and bubbles will burst. For example, in spring 2000, the media started claiming that semiconductor stocks would no longer be cyclical, which was the peak of chip stocks; a year later, energy stocks surged, with many analysts predicting a 20%+ return over the next few years, but then many of these stocks fell 50%–60%.

Third, do not fall in love with a company’s products. Many years ago, handheld computers were popular, but a good product does not necessarily translate into profits. Between 2001 and 2002, handheld computer companies lost hundreds of millions of dollars over two years, and by mid-2003, their stock prices had fallen 98% from their IPO levels. When buying stocks, ask yourself, “Is this an attractive business? If I could afford it, would I buy the entire company?”

Fourth, do not panic during market declines. The most attractive times to buy stocks are usually when no one wants to buy, not when even a barber can set the highest price for stocks. There is often a temptation to confirm or verify that others are doing the same thing. But history repeatedly shows that when everyone is avoiding buying these assets, it’s often the cheapest time to buy.

Fifth, do not try to time the market. Market timing is an unprecedented investment lie. No strategy can continuously tell you when to enter or exit the market, and no one can do it. Among thousands of funds tracked by Morningstar, none have consistently succeeded in market timing over the past 20 years.

Sixth, do not ignore valuation. The only reason to buy a stock is that you believe its current price has investment value, not because you think a bigger fool will pay more in a few months. The best way to reduce investment risk is to pay close attention to valuation and not hope that other investors will buy your shares at a higher price—even if you are buying good company stocks.

Seventh, do not ignore comparative analysis of earnings data. The true measure of a company’s financial performance is cash flow, not earnings. Because accounting based on earnings per share can be manipulated to produce the net profit management wants, but cash flow is hard to fake. If a company’s operating cash flow stagnates or shrinks while profits grow, something is likely going wrong.

(Article source: China Securities Journal)