What really sets retail investors apart is never technology, but these 3 cognitive factors

A veteran stock investor with a net worth of over 100 million said: Stock trading is not that simple. After losing millions, I finally understood a few principles. If you can truly achieve the unity of knowledge and action, making money is just a matter of time.
First: Chasing highs is not the same as following the trend. True trend-following means sticking closely to the trend. Many people think trend-following is simply chasing highs, but that’s not the case. Lei Jun once talked about this: He said people think trend-following is chasing the hype, and that it’s not long-termism. But in fact, the opposite is true—trend-following is real long-termism. For example, take AI. Lei Jun started planning for it as early as 2016, and in the blink of an eye, 10 years have passed. But AI is a long-term journey, and it will only get better in the next 10 years. So trend-following isn’t just chasing highs; it’s acting according to objective laws. What are objective laws? They are the natural development of things, independent of human will. This is called the trend.

I remember Darwin once said: The people who will never be eliminated by this world are not the smartest, not the hardest-working, and not the most talented, but those who can always adapt to change. This applies to both biology and humans. So the survival and development of this world have never changed—it’s about following the trend of social development and keeping up with the changes in this world. The only constant in this world is change itself. This is true for business, where people change, demands change, and money flows. It’s also true for investing, where industries change, corporate moats change, company founders change, and cash flows change. So the future is an era of high volatility. I think we should feel fortunate, as Zhang Yiming said: The most exciting thing about entrepreneurship is that we are in an era of massive change, so there are always opportunities. This is true for entrepreneurship and for investing.

Second: Stock trading requires risk management. Only by controlling risks can you truly protect profits. You must always keep an eye on risks in stock trading. I remember a startup veteran once told me: True entrepreneurs are not those who dare to take risks, but those who are good at controlling risks. So you’ll find that companies with particularly good business models usually have very low debt ratios. That’s the reason. We can tell countless stories about high leverage leading to ruin. Remember LeTV, which was once globally popular? It later delisted due to debt, and its founder fled abroad. Then there’s Evergrande, which we all know—it was overleveraged in real estate, and when the bubble burst, it ended up with 3 trillion in debt overnight, and its founder fled to the U.S. That’s the price of high leverage.

I remember Buffett saying that when investing, the first thing to look at is the business model. Companies with good business models usually have low debt ratios. If you don’t believe me, look at Apple, Microsoft, and Google—their debt ratios are very low, and their operating costs are also very low. Apple’s operating costs are about 2% of revenue. With such a large user base and such low operating costs, these companies have exceptionally good business models. I remember when I was in school, there was a top student. I asked him why he always scored high, and he told me: The secret to being a top student isn’t scoring high, but avoiding losing points. That’s the feeling of making light of heavy things. Everyone around him thought he was amazing, but only he knew he was just studying for over 10 hours a day. It’s all about practice—no tricks, just skill honed through repetition. Duan Yongping once said in an interview: On the right path, strive until you’re powerless. The game isn’t about who wins more; in the end, everyone’s strength is about the same. What matters is who makes fewer mistakes—the one who makes fewer mistakes usually wins.
Third: To identify the real leader, look for differentiation. Only differentiated products can generate substantial profits. True profits come from differentiation, and product differentiation is incredibly powerful. Why does Buffett say Coca-Cola is a good business, flight safety is an average business, and airlines are terrible businesses? Because Coca-Cola has taste differentiation, flight safety has service differentiation, but airlines have almost no differentiation. Just check airfares—almost every airline’s prices are about the same, so the profits don’t flow to the companies.

Why does Lin Yuan advocate investing in things related to consumption? It’s still because of differentiation. Generally, food and beverages have significant differentiation. People who like Weilong spicy sticks rarely eat other brands. Those who like Kweichow Moutai won’t drink other liquors. Those who like Coca-Cola won’t switch to Pepsi just because it’s cheaper. So the differentiation in food and beverages is huge. Of course, channel differentiation is also powerful. For example, Coca-Cola is everywhere globally, and Nongfu Spring is visible in every corner. That’s the power of channels. Although mineral water has little differentiation, Nongfu Spring has created differentiation by tying almost all its major products to health. So its concept is excellent and fits China well.

Although the restaurant industry has little differentiation and is a tough business, Haidilao’s service provides differentiation. Everyone knows Haidilao is expensive, but everyone also knows its service is great—yet no one can replicate it. Truly differentiated products or companies are those where competitors can’t copy what’s right in front of them. Such companies are usually good ones.$SSE Index(000001.SH) $Sanhua(002050.SZ) $ADDSINO(000547.SZ)