In my understanding, all investment activities can be divided into four types of investment models

(Size is relative to principal and return)

Small bets for big gains - using small capital for large returns

Common behavior: gambling

Small bets for small gains - using small capital for small returns

Common behavior: regular investment (related to investment targets, here referring to most regular investment targets)

Big bets for small gains - using large capital for small returns

Common behavior: buying a house (to beat inflation)

Big bets for big gains - using large capital for large returns

Common behavior: corporate mergers and acquisitions

In investing, I believe the most important risk control is position size; risk control has three parameters

Win rate

Win rate, relative to loss rate, simply put, in ten investments, if the number of investments with returns greater than zero is 6, and those with returns less than zero is 4, then the win rate is 60%, loss rate is 40%.

Return rate

Return rate, relative to loss rate, in winning investments, the ratio of returns to investment principal is the return rate, while the ratio of lost principal to investment principal is called the loss rate.

Bankruptcy rate

Bankruptcy rate, the maximum amount you can afford to lose, simply put, if you can only afford to lose 5,000, once the loss exceeds 5,000 and you cannot repay the debt, you will declare bankruptcy. That is, the maximum amount you can afford to lose relative to your principal is the bankruptcy rate, while conversely, you have a profit-taking rate, which is the ratio of profit to principal when you exit the market, i.e., the profit-taking exit return rate.

The higher the bankruptcy rate, the less fluctuation you can tolerate, and the harsher your investment environment

We pursue high return investment behaviors with a high win rate while controlling the bankruptcy rate

If you can't achieve all three

First survive (control bankruptcy rate)

Then win a few more times (listen more, watch more, ask more, discover excellent targets)

Ultimately pursuing high returns (multiple investment attempts, adjusting posture, heavily investing in quality targets)

Analyze your understanding and assets, combine understanding with cash flow, control bankruptcy rate.

Analyze each investment target, combine it with your understanding and investment capital, control win rate and return rate

Investment models and risk control parameters come from your past investment history

Summarizing your investment history will lead to understanding your investment preferences

Knowing your investment preferences, you'll know if you're the type to turn five thousand in capital into one hundred thousand in return

Lastly, one point to clarify, in my consciousness

Stable cash flow is key to ensuring your survival in the market, whether the market is booming or dead!!!

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