Old Cat: Different investment sizes require different investment strategies

This article was published on January 21, authored by Lao Mao
For myself, I have no goals of fame or fortune, but I have to do something that is very mentally exhausting, which does not align with my logic. I quite enjoy my quiet life now and do not want to make things difficult for myself, nor do I need gratitude or emotional responses.
However, I hope my sharing may have a little bit of value. Regarding my background and experiences, some information can be found online, and I won’t elaborate further; the past is the past and doesn’t explain much. 1 I will mention two things: one is personal growth. At that time, I saw Teacher Shi Zhenyi (founder of Alpha Academy) define the Alpha community as achieving 1000 times in 30 years. When Teacher Shi invited me to speak on December 2, I asked him to keep my investment returns over the past seven years confidential, but later I thought that this number doesn’t need to be kept secret. Why? Even if it were 10,000 times, if the initial capital were only one yuan, it would only amount to 10,000 yuan. Now I can confidently say that in the past seven years, I have far exceeded 1000 times in returns. Today, I just checked the data, and it has steadily surpassed 10,000 times. The second is about my team. Currently, my team and I are managing a very small fund - Longmen Fund (longmen.fund). Initially, I wanted to issue a tradable token based on each fund share, allowing those who do not want to hold the fund to sell it. However, in the investigation, no one was willing to accept such a token, so we could only operate in a closed manner. I plan to liquidate the fund at an appropriate time within a year after April 2021. The returns of Longmen Fund look good now; since August 2018, the returns have been about three times or more. Except for the types of investments in the background, the daily net value changes of the fund are public, and there are several years of curves available for viewing. After the Longmen Fund matures, I have not considered extending the term or continuing to help others manage their funds; managing other people's money is too troublesome, and managing my own money is much more reassuring. 2 When Teacher Shi invited me to share, he hoped I could enlighten confused investors and learners, so I mentioned this sentence: All knowledge is self-sought.
The so-called confusion is not due to a lack of learning but rather a lack of lessons; it is usually not about needing enlightenment. I asked Teacher Shi about the audience's demographic, and he said there are basically all asset sizes, but each person has a belief in learning and growing in investment. If I were to share dryly about my investment industry experiences, it would indeed be meaningless; this is something that should be learned by oneself, and sharing is of little use. Later, I thought that I also started as a novice investor with very little money, gradually making my way to today. So I talked about how I thought at different levels. I must admit that luck played a significant role in my journey to today, but my cognitive improvement also helped me seize some of that luck. Therefore, the first thing in investing is to understand oneself. Everyone is very different; I think one commonality can be found in the stages of investment growth. Each person is at a different stage, and looking at asset size is the simplest way to determine each person's investment stage. Each stage requires different strategies, which also fall within each person's own cognitive range. What I will share next is my own story, which cannot replace anyone else's, as each person's judgment of their stage and surrounding environment is different.

• Assets less than 500,000

When my assets were below 500,000, I was working hard. At this time, there was a lesson that made me realize that any risk-taking or leveraged investment is not worth it when assets are very small. My investment base was very small at that time, but I was too "brave" in this stage. I earned 200,000 yuan by luck for the first time, wanting to make quick money, so I rushed into the futures market. In a month, I worked hard to turn that 200,000 into 30,000, and I retreated in disappointment. Looking back now, I am quite impressed with my past self; fortunately, I had some self-awareness and did not completely collapse at this stage. Later, I continued to work hard and diligently, gradually accumulating my basic assets.

• Between 500,000 and 2,000,000

During this stage, I was relatively lucky and had already started investing in digital currencies. I’m not just talking about Bitcoin; Bitcoin only occupies a large portion of my holdings. At first, I didn’t understand digital currencies, so what could I do? I had to learn desperately. I learned about investment varieties, the fundamental knowledge behind them, operational logic, and risk control, gradually forming my own investment fortress, striving to be able to enter and exit. In this stage, I always kept over 50% in safe assets, with the other 50% allocated to relatively aggressive investments. Through continuous successes and failures, along with effort and luck, I expanded my returns; this stage was my most diligent work and learning phase.

• Between 2,000,000 and 5,000,000

By this stage, I had begun to understand the investment field. Especially when the industry was still quite niche, I had gained insights into how to invest and allocate in this field. Years ago, I wrote an article, “What’s Behind the Madness of Ethereum?” (written when Ethereum was 25 yuan), which should still be found online. This article is over 10,000 words long, and I consider it very valuable, so I was reluctant to share it for free; I charged 25 yuan to read it. Later, I made it open-source and published it on my public account. This article became the most read piece I’ve written, where I estimated that Ethereum's future price would exceed 400 dollars. Ethereum was a huge opportunity in my personal asset growth, and my breakthrough from 2,000,000 to 5,000,000 was also due to this investment process. At that time, I pondered whether I was constrained by my own beliefs; where was my glass ceiling? At this stage, I allocated 70% of my assets to relatively safe reserve assets. I believed Ethereum was a very safe reserve asset, while the remaining 30% was for aggressive investments.

• Between 5,000,000 and 20,000,000

At this stage, due to the different asset scale, I became increasingly conservative, giving up any gambling-style investment methods and abandoning all surface or potential leveraged trading models. At this level, I could pursue some stable profit opportunities. It seemed that by giving up on being aggressive and slowing down, I might find a way to move faster. During this time, I gradually began to accumulate Bitcoin. This was relatively slow because Bitcoin's rise cannot compare to altcoins, which often aim for hundredfold returns. I have bought Bitcoin for so many years, and to this day, it has only increased tenfold from its lowest point. However, I gained high liquidity and high security, so even if it was slow, it was still fast.

• Above 20,000,000

Above 20,000,000, up to today, I have learned to understand investment cycles and the importance of taking active breaks. Many people ask me what I am busy with, and I say I am not busy with anything; I live according to my own ideas, trying to make myself a bit happier, and when I feel like thinking, I ponder some issues. I see opportunities everywhere, but I am willing to participate in very few; I have the right to choose. This change comes from striving to observe the world and having my own investment principles. At this stage, investment logic is greatly related to my understanding of the world. Will the future world get better? Perhaps everyone has a different answer to this question. However, the answer to this question has a huge impact on my investment direction, and I will mention this topic later. What are my core investment varieties? Currently, my largest position is in Bitcoin; everything else is just allocation for me. Why do I do this? I believe that compared to other investment varieties, Bitcoin is an infinite game. Not everyone knows about infinite games; you can search for it. Aside from my living necessities, I never want to sell the vast majority of my holdings, nor do I want to convert them into any country's fiat currency. I want to see what it will become in my lifetime. 3 Investing is a very difficult thing; from the beginning, you choose to go everywhere and fall into pitfalls; the whole journey is full of traps. I can say that before reaching 20,000,000 in assets, you need to have a considerable ability to make money outside the market; otherwise, what you see in front of you may all be illusions, and you cannot hold onto anything, no matter how good it is. Ultimately, investing is about reaching a certain realm. I am not a person who stirs things up; I consider whether each choice is worth the trouble. For example, if I can’t find a job that pays as much in a month as my daily asset fluctuations, I can only choose to do what I like rather than what makes money. However, there is one person I must admire; his realm often makes me feel ashamed. Whether it’s coins or money, he has more than I do, yet he is still very busy—writing, building communities, teaching, investing—constantly on the go. This year, I asked him again a question I had previously asked: What drives you to maintain such motivation? What do you seek? He said he just wants to know where my limits are. You might have guessed it; this person is Li Xiaolai, whose towering presence makes me realize I am just an ordinary mortal. 4 I need to remind you that if you invest in Bitcoin, you must do as I once did: you need to work hard to understand everything yourself. No one has any obligation to replace your understanding, not even the smallest thing; there is no reason to blindly buy just because someone says so, not even because I say so. I will not be responsible for your investment results; perhaps in ten years, I will be making money, but you may still be losing money; I do not bear any responsibility for this. Aside from yourself, no one will be responsible for you. Those who invest in Bitcoin have also discovered something very interesting: after Bitcoin surged this year, I found that blocking Bitcoin news has become a collective consensus in many stock investment groups; I do not mean to be sarcastic. Why is this? Aside from some group members possibly feeling a bit embarrassed about their returns, I think the biggest reason is that Bitcoin and stocks are completely different knowledge systems. To cross a knowledge system, one must break through the original cognitive ceiling and upgrade their understanding, which is particularly difficult. And for difficult things, choosing to avoid them is human nature. Many people think they understand Bitcoin, but in reality, they may only grasp a superficial concept; truly understanding it is very difficult and rare. I am the same; aside from this industry, I know nothing about other fields. For example, I completely do not understand stocks in the electric vehicle industry. I fear the cold in winter, the heat in summer, and I love air conditioning; I even have severe battery anxiety when using my phone. Therefore, I still have no intention of buying an electric vehicle, and I have not made a penny from electric vehicle stocks; fortunately, I did not short Tesla. From another perspective, as a Bitcoin holder, I am very grateful to those who have a superficial understanding of Bitcoin but are obsessed with shorting it, as they provide insufficient energy for Bitcoin's rise. Today’s talk may be a bit harsh; I hope everyone does not take offense. After all, I am not here to seek everyone’s approval, but since I was invited, I will say what I need to say. If you find my words unpleasant, just bear with it; we will have opportunities to meet again in the future, and we are still friends, but I must express my views; otherwise, the significance of my sharing would be diminished. 5 Finally, I want to talk about my investment philosophy. Regarding investment philosophy, I want to share some ways to judge investment varieties, which are similar, but I still want to share my views. First, when investing, one must study trends. It is essential to understand whether the investment variety has a generational breakthrough technically, whether it is becoming a reality, whether it has the potential to become a phenomenon, and whether it can be gradually accepted by mainstream society. Second, see if it is reversible and whether there is irreversible value. If the investment target suddenly disappears, is that unacceptable in this world? Third, look at the historical data growth of the investment variety. Does its historical business data maintain continuous growth? Fourth, consider the timing of entry. Every investment has an entry timing; is this moment the most suitable time to enter? This is something I believe must be judged in reverse regarding investment varieties. 6 There is also a concept of pattern and execution. First, the larger the investment pattern, the better. For example, investing in a coffee shop versus investing in a Starbucks has completely different patterns; the actual busyness might be similar, but the investment returns and opportunities could be entirely different. Second, the ability to execute. This is difficult to express; I really cannot say which is better, the difficult or the easy. Choosing to execute something more challenging has led to many successes, suitable for those who are very diligent and have strong personal abilities, but I personally choose to do simpler things. Regarding the future world, if I could only choose one investment opportunity, and this investment opportunity relates to future money in the world, from the perspective of pattern size and execution difficulty, it is about capability for me. I believe investment also involves a future perspective, meaning our views on the future world can be positive or negative, with no right or wrong. The world is inherently diverse; from each person's perspective, some see it positively, while others see it negatively, but everyone is essentially betting on their own understanding through their investments. For example, Teacher Shi has a very optimistic view of the future world; I was stirred by his beautiful description of the future. Therefore, Teacher Shi, who is very optimistic about the future, chooses diverse growth stocks and bulk commodities, achieving unity of knowledge and action, and has received positive returns. I believe he will continue to receive positive returns in the future. However, personally, I am relatively pessimistic about this world, so I choose to invest in Bitcoin to hedge against this pessimism, which is also a unity of knowledge and action, and I have received my historical returns; I believe I will also receive returns in the future. 7 The world is diverse; choosing stocks or Bitcoin is not a matter of right or wrong, just like making money in both rising and falling markets. The real part that can make money is when one's understanding reaches that interval. For example, someone sells their house, but they do not know that there is a priceless painting left inside; the price of that painting exceeds that of the house. The future returns of that painting have nothing to do with him because that money is beyond his understanding and should not be his to earn. Every investment opportunity has a specific time window. Bitcoin is an opportunity I have grasped, but for those entering now, I cannot assert it is the best opportunity. At every point in time, whether Bitcoin is a treasure or a poison, everyone needs to judge for themselves, just as I do not have a good window to invest in Wells Fargo or Coca-Cola. Every era has its own Buffett, every era has its own Coca-Cola, and every era has its own Bitcoin. I hope everyone can use their investment philosophy to find their best investment opportunities. Alright, my sharing ends here. Finally, I wish everyone high returns on their investments in the new year and a good year ahead.