28 October 2016
Young investors need to have patience and avoid being greedy. Photo: AFP
Young investors need to have patience and avoid being greedy. Photo: AFP

What young Chinese investors need to learn

The so-called fifth-generation stock investors have dominated the mainland equity market.

These investors were born in the 1980s or ’90s, and they rushed into the market.

“They take bold moves and act swiftly,” the official Xinhua news agency said.

However, they may have been burned as the mainland market tumbled in recent days.

There are popular stock investment tips catering to these young investors.

The tips say “sell into a big rally in the morning, and buy into a sharp fall in the morning. Hold if the market jumps in the afternoon, and buy on the second day if the market tumbles in the afternoon. Don’t sell into a sharp decline in the morning, and go to sleep if the market steadies”.

Investment is a serious business needing serious knowledge, and investors should not treat it as gambling.

They should learn from the experiences and lessons of others.

First, investors should maximize their profit while taking the minimum risk at any time.

And they should not chase skyrocketing stocks. That’s the mistake most people make, and up to 90 percent of investors have suffered losses by doing that.

Second, investors should give up stocks that follow the trend but lack fundamental support.

Third, successful investors are those who can get rid of emotional disruptions.

They might feel sad, angry or excited, but they can calm down quickly.

Fourth, most investors believe the higher the risk, the higher the return.

However, successful investors do not buy into that. They invest with minimum or even no risk.

Fifth, individuals may think of themselves as geniuses in a bull market. But they realize the reality when they lose the game.

Sixth, a mentality of leaving things to chance makes people take on more risk, and hesitation makes them lose good opportunities.

Seventh, investors should remember three sets of five guidelines.

Five principles: stable, accurate, wait, fierce, tolerant.

Five don’ts: do not be greedy, fearful, in a hurry, regretful, slow.

Five qualifications: knowledge, patience, guts, health and capital.

Eighth, it’s more important to make money all the time than to make big money.

That grows your wealth constantly and helps you to keep a good mindset.

Ninth, it takes time to make a good investor.

There is a saying on Wall Street that you will be able to make money from time to time if you stay in the market for 10 years.

And you will be able to teach others if you stay in the market for 20 years.

You will become very rich if you get through 30 years in the market.

Tenth, one will suffer from a cold standing at the peak.

Investors have to watch closely the new economic norms in China given the mainland market is primarily policy-driven.

The central government has three goals at the moment: stabilizing growth, curbing risk and adjusting structure.

It’s quite difficult to maintain a balance among the three goals.

A sharp economic slowdown would trigger various risks.

Therefore, the government will put priority on maintaining growth, which means it still has plenty of monetary policy stimulus it is willing to use.

This article appeared in the Hong Kong Economic Journal on June 29.

Translation by Julie Zhu

[Chinese version中文版]

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Senior investment banker

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