What is the most suitable investment method for ordinary people?

Everyone who enters the stock market may have fantasized about one thing:

To find a great company, go heavy on it before everyone else understands it, and then accompany its growth for ten or twenty years, ultimately achieving a leap in wealth.

This is, of course, the ideal state of investment.

Buffett went heavy on American Express early on, and later on Coca-Cola; Munger repeatedly emphasized that opportunities that truly change your life do not appear very often. Once a good ball comes your way, you should catch it with a large bucket rather than a small spoon.

Investment requires waiting for the strike zone, and daring to go heavy when opportunities arise.

This principle is sound.

The problem lies in whether ordinary investors can really find that strike zone.

I. It is difficult for ordinary people to find "highly certain" heavy positions

Good companies are not hard to discover.

Apple, Microsoft, Google, Amazon, NVIDIA—everyone knows they are excellent enterprises.

What is truly difficult is judgment:

Can this company continue to be excellent over the next ten years?

Is the current price cheap, reasonable, or has it already discounted the future?

If the stock price drops by 30%, is the market wrong, or is your own investment logic wrong?

If competitors emerge, technology routes change, or management makes mistakes, can we detect them in time?

None of these questions are easy to answer.

Moreover, ordinary investors have their own work and lives, making it hard to read financial reports, study industry chains, track competitors, and analyze management's capital allocation every day.

Many people's so-called "understanding a business" actually just means reading a few articles, watching some videos, and seeing the stock price rise continuously, which creates a strong sense of certainty.

But the most dangerous thing in investing is precisely mistaking "I am bullish" for "I have understood it".

II. Heavy positions amplify returns, but also amplify errors

Why is concentrated investment attractive?

Because wealth leaps are indeed hard to achieve with dozens of small positions.

Assume a stock accounts for only 1% of total assets; even if it rises tenfold, its contribution to the entire portfolio is only 9%.

You might accurately judge a great company, but because the position size is too small, you ultimately fail to change your wealth scale.

Therefore, Buffett and Munger's emphasis on concentrated holdings makes sense.

When a person truly encounters a major opportunity within their circle of competence, having too small a position is essentially an error.

But there is another side to the story.

Position size can amplify correctness, but it can also amplify errors.

A stock accounting for 3% of total assets dropping 50% has limited impact on the whole portfolio; a stock accounting for 50% of total assets dropping 50% means a direct loss of one-quarter of the total assets.

If the investment logic is eventually proven false, a heavy position is not a wealth accelerator, but an error amplifier.

Therefore, what concentrated investment truly requires is not just courage, but extremely high research ability, business judgment, psychological resilience, and error-correction ability.

The easiest thing for ordinary people to learn is "going heavy," but the hardest is the decades of accumulation before going heavy.

III. True certainty is often only visible after the fact

Looking back at history, many opportunities for great companies seem very obvious.

After Apple launched the smartphone, it seemed destined to change the world.

Amazon's long-term expansion seemed destined to make it an e-commerce and cloud computing giant.

NVIDIA seizing the AI wave seemed destined to make it the core company of the computing era.

But standing at that time, things were far from as clear as seen later.

Apple once faced fierce competition from Nokia, Samsung, and the Android camp;

Amazon had meager profits for many years, and the market long questioned whether it could actually make money;

NVIDIA also experienced cryptocurrency crashes, inventory adjustments, export restrictions, and massive drawdowns.

The "great companies" seen today are the winners remaining after traversing countless uncertainties.

History only displays the victors, but does not remind us that there were also many companies that looked full of hope at the time but ultimately failed.

This is survivorship bias.

Therefore, investors must acknowledge a reality:

Great companies are always obvious in hindsight, but never so certain ex-ante.

IV. Index funds solve exactly the boundary of ordinary people's capabilities

Many people believe that buying indices is because they cannot pick stocks and can only accept mediocre returns.

I used to understand it this way too.

But as investment time grows longer, I gradually realized that index funds are not a low-level choice, but rather a very mature institutional arrangement.

The core logic of index investing is:

I don't need to know in advance which company will become the ultimate winner; as long as excellent enterprises as a whole continue to create value, I can share in their growth.

We don't need to judge whether NVIDIA will continue to lead in ten years, or whether Google, Microsoft, and Amazon will catch up in the AI era.

We also don't need to judge which company will ultimately succeed commercially with a new technology.

Indices will gradually increase the weight of winners and constantly reduce the weight of losers.

Excellent companies enter, lagging companies exit.

This is equivalent to handing the most difficult task of "picking the ultimate winner" to the market, simplifying our own tasks into two things:

Continuous investment, and long-term holding.

This may be where index funds are truly powerful.

V. Index investing seems simple, but is actually difficult

Of course, buying indices does not mean you will definitely make money.

The greatest difficulty in index investing is not which index to choose, nor on which day to buy, but whether you can persist in the long term.

When the market rises, investors complain that indices rise too slowly and cannot resist chasing hot individual stocks;

When the market falls, they worry about economic recession, tech bubbles, and systemic risks, stopping regular investments or even cutting losses to leave.

Many people do not lose to indices, but to their own emotions.

They are overly optimistic during rallies and extremely pessimistic during downturns, accelerating at highs and exiting at lows.

Therefore, what index investing truly requires is not profound financial knowledge, but long-term discipline.

Accept inevitable market volatility, accept underperformance in stages, accept not making money for several years, and accept that you will never buy at the absolute bottom.

As long as social productivity continues to progress and excellent companies continue to make money, long-term holding of quality indices is sharing the value created by the entire commercial system.

VI. What suits ordinary people best may not be pure indices, nor extreme heavy positions

I increasingly feel that investment does not necessarily require choosing between "all individual stocks" and "all indices".

A more suitable approach for ordinary people might be:

Use index funds as a long-term core position, and use a small amount of individual stocks to express judgments you have truly researched and understood.

Index funds are responsible for solving capability boundaries.

Individual stocks are responsible for retaining the possibility of researching businesses and seeking excess returns.

In this way, even if the judgment on one company turns out to be wrong, it will not destroy the entire portfolio; and if you indeed research excellent companies correctly, you can gain extra returns from them.

More importantly, this structure does not require investors to find a single stock that can change their destiny.

When there are no major opportunities, continue buying indices.

Only when a true opportunity arises—one you have researched long-term, understand deeply, and offers sufficient odds—should you appropriately increase your position.

It is not about finding stocks to go heavy, but about going heavy naturally becoming the conclusion because you truly found an opportunity.

VII. The most important thing for ordinary people is not pursuing wealth miracles

We often discuss how to achieve a wealth leap.

But for most ordinary people, investment should first solve the issue of continuous appreciation of long-term savings, not getting rich overnight.

If a person can achieve:

Continuous work, stable savings;

Purchase quality assets;

Avoid high leverage and devastating losses;

Not being forced to sell during market crashes;

Extending the investment cycle to ten or twenty years;

Then even without finding the so-called ten-bagger, the accumulated wealth may far exceed most people.

The investment method truly suitable for ordinary people should not rely on making consecutive correct judgments, nor on a single all-in bet.

It should allow us to make judgment errors, allow for limited capabilities, and allow for lack of time to research all companies.

Even so, we can still move forward slowly relying on time, savings, and compound interest.