On a June afternoon, I brewed a pot of Pu'er tea and watched as the cost of a certain bank in my account dropped to negative numbers. Suddenly, I wanted to share my foolish method with new investors.
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When I trade stocks, I stick to my principles: buy good companies when their stock prices fall to rock bottom, and close my eyes. The day a certain major bank's stock fell below its net asset value, I gritted my teeth and converted my year-end bonus into stocks. When the stock price rises back to the five-day moving average, I sell the portion I bought to average down. I have used this method for over a decade, and the cost basis of the bank and leading liquor stocks in my hands has long been zero.
Two years ago, the leading new energy stock dropped from 692 to 353, and I started to average down, doing it in three batches. Every time it rises back to the previous high, I sell the averaged-down portion. Now my cost basis is less than 200. Don’t complain about earning slowly; after twenty years, the account is like a leaky pool—the water level of the cost keeps dropping.
My friends laugh at me, saying that with a bull market, I should go all in. But they forget how badly it crashed in 2008 and 2015. I’ve seen too many smart people chase highs and cut losses, only to end up losing their capital. Now when they gather, they call me "Brother Rolling Stocks," but the secret is just six words: don’t cut losses, don’t be greedy.
Of course, this method only works with two types of stocks: either bank stocks as a ballast or companies like Yangtze Power that can be passed down through generations. Last year, I tried using this approach with tech stocks and almost got hurt. Ultimately, a foolish method must also be paired with good stocks, just like choosing good seeds for farming; trading stocks requires selecting the right national fortunes.
The tea in the pot has grown weak, but the numbers in my account are becoming more substantial. I plan to use this foolish method for another twenty years...
