Last night, my wife and I had a discussion about what stocks to buy after the lights were turned off, and we had some disagreements about it.

My wife thinks we should buy Moutai instead of Wuliangye liquor that I bought, and for the air conditioner, she thinks we should buy Midea instead of Gree that I bought.

My wife says, you often claim that you have mastered something, have you chosen the wrong path?

I explained my understanding to her with helplessness, but thankfully, as I understand more deeply, my explanation becomes more concise.

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I said that the introduction to investment is divided into 5 levels.

The first level is understanding value. You have the ability to distinguish what is good and scarce, and what is bad and fake. In the stock market, the essence of value is scarcity.

For example, how to judge the scarcity of something? Something that is in shortage will be expensive.

The second level is understanding valuation, which is the first secret of the stock market. A good thing may not be worth buying if it is too expensive. And a bad thing can still be valuable if it is sold too cheap.

I will give an example. Take Moutai as an example, people who bought Moutai in 2021 at 2600 yuan did not make money in five years and lost 40% of their money. This is absolutely expensive.

Compared to Gree, Midea is better but pricier. Gree is also good but cheaper. This is relative costliness. Comparing relative cost with others is complex, sometimes it's more about stage and aesthetics.

The third level is understanding logic. This is the second secret of the stock market. Understanding valuation allows you to determine whether a stock will fall or not. But only by understanding logic can you determine whether it will rise or not. In

This level is based on the accumulation of a large amount of information, which belongs to daily efforts and cannot be solved by cognition alone.

The fourth level is to understand probability. This is the third secret of the stock market. Understanding probability will make people try to improve their probability advantages and profit-to-loss ratio. People will pay attention to risk control an

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I said the first four layers are like this. My question is that I only reached the second level last year.

So my first mistake was only focusing on valuation without understanding the opportunity cost. Because the liquor I bought only had a value valuation without any logic behind it.

My daughter-in-law asked, 'You said you had logic. Didn't you say last year that it would stimulate domestic demand?'

I said, logic applies when it comes from the enterprise or industry itself. For example, take Juhuacn for instance, its products have been constantly increasing in price, which means its performance will also improve, that's what I call logic. Anothe

I believe stimulating domestic demand is a macro judgment. The term is called speculation without evidence.

My wife said, I remember you once heard a video that advised not to judge the macro environment.

I said with frustration, yes, Buffett said not to judge the macro. Now we know why he's a stock god. To understand the macro, the macro is a long-term variable. Don't rely on macro judgments for short-term actions.

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I made the second mistake, which is not respecting probability and trying to hold weak stocks indefinitely. This is a common problem for retail investors, their most basic trading pattern. I didn't learn much about trading patterns and relied purely

I said it's not about Wuliangye liquor. I want to win once for all, but actually the probability advantage comes from the statistical results of multiple transactions. My trading model has no probability advantage, and if I keep doing this, one mista

Just a few improvements need to be made to my basic operation. For example, stipulate that the position size be increased on the right side, with no more than 1% increase on the left side at one time. Set an upper limit of 20% for individual stocks.

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After speaking for half a minute, I concluded that my past problems lay in knowing too little about business logic, being too stubborn in my approach to trading that did not respect probability, and being unlucky enough to encounter suppression.

Is that all?

I said, it's done.

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