Three Types of Investors in Xiaomi

Veterans all say that investing requires going through several cycles, and there might be truth to that. After nearly a year of observation, I found that people investing in Xiaomi mainly fall into three categories. The common point might be that they all suffered significant losses or paper losses during this downtrend, but they exhibit different mindsets and behaviors.

I. Those who follow volatility trends

Especially from late 2022 to mid-2023 when Xiaomi's rally was strong, many people established positions.

Back then, those using leverage were particularly eye-catching. Anyone using leverage had enviably high annualized returns. However, trend volatility also has the greatest impact on leverage. Apart from some veterans who exited in time to avoid risks and lock in profits, after the stock price surged to 50+ and peaked, many tried to bet on a rebound. Looking back now, it's estimated that most of them had to suffer many irreversible principal losses.

Then there are those who don't use leverage. Previously, whether adding positions or day trading, they made a lot of profit in this main upward wave. But in the subsequent downtrend, although they didn't face irreversible losses like margin calls, because their trading core is trend-following, when the trend deteriorates and volatility becomes too high, their psychological defenses are easily breached. Many ultimately had their conviction shattered and cut their losses to exit.

II. Those who follow the company's fundamentals

There are also many people who hold shares because they are bullish on the company, genuinely identifying as Xiaomi shareholders.

In the downtrend, they would add positions against the trend because they are bullish. However, they likely over-trusted and optimistically added positions, and this downtrend was very deep, leading to significant profit drawdowns. The difference from pure trend followers is that they appear more resilient to Xiaomi's paper losses. It's just that under the current extreme cyclical impact and the halving drop, they need immense patience and resilience, supported by firm belief.

III. Those who follow their own trading system

This type of person has honed their own trading and holding strategies through years in the stock market.

Although during the unilateral upward phase, they earned far less than the first category, and less than the second category, even appearing somewhat mediocre. But they never put themselves in dangerous situations, nor do they treat belief as a bargaining chip. This deep downtrend also has the least impact on them. It's equivalent to using their own strategy to smooth out the market's volatility, relying not on trends nor the company, but on their own trading system.

IV. Reflections

Of course, these three types can also transform. Actually, when I first established a position in Xiaomi, I was also the first type. Now, enduring the cycle, I'm more like the second type. I hope to become the third type if given the chance.

Sky Nomad is finally about to be released after three years, demonstrating rare patience in this era of new energy products being launched one after another. I hope it can withstand the pressure within the cycle and bring about a stage of rebound. I feel that in the secondary market, whether it's novices or veterans, short-term information is similar for everyone. The difference might lie in whether one only looks at the information itself, or after extending the timeline and connecting a series of events, infers the main drivers and forces behind the analysis to gain an understanding of certainty and direction. Anyone can play in a favorable wind; it's the headwind that truly tests ability. I'm bullish on the short-term opportunities brought by Sky Nomad, and the series of achievements and rare composure achieved by Xiaomi during this headwind cycle.

$XIAOMI-W(01810.HK)