Having experienced dozens of bull and bear markets, the father of mutual funds, John Bogle, summarized ten rules

PS: The simplest and most profitable operation is to buy in a bear market and sell in a bull market. How to determine a bull or bear market is key; mark good articles when you see them.

He experienced 27 bull markets and 26 bear markets in the 20th century, worked as a professional investor for 68 years, and never lost money in a single year, earning the title of "Century's Long-Lived Stock Market Winner." The funds managed by his company, Neuberger Berman, once reached $200 billion.

In his autobiography, "The Century's Stock Market Winner: The Autobiography of Roy Neuberger, Father of American Mutual Funds," Neuberger summarized the ten principles of his investment career, which are worth reading carefully:

1. Know Yourself

After analyzing various intertwined factors, if you can make favorable decisions, then you are the type of person suited for the market. Test your temperament and character:

Do you have a speculative mindset?

Do you feel uneasy about risks?

You must answer yourself honestly and completely. You should be calm and composed when making judgments; being composed does not mean being dull. Sometimes, an action can be quite swift. Composed means making prudent judgments based on actual circumstances. If you have done your preparatory work well, making quick decisions is not a problem.

If you feel you are wrong, quickly withdraw; the stock market does not require long procedures like real estate to correct mistakes. You can escape at any time.

You need to have a lot of energy, the ability to react quickly to numbers, and, more importantly, common sense.

You should have an interest in what you are doing. Initially, I was interested in this market not for money, but because I did not want to lose; I wanted to win.

The success of an investor is built on existing knowledge and experience. It is best to invest professionally in areas you are familiar with; if you know very little or have not analyzed the company and its details at all, it is better to stay away.

I did not invest overseas because I do not understand foreign markets; I have hardly traded in foreign securities markets. I mainly invest domestically. My international investments are also made through domestic companies, most of which are global enterprises, like IBM, which derives half of its profits from overseas.

Before you truly become an investor, you should also check whether your physical and mental conditions are qualified. Good health is the foundation for making wise judgments; do not underestimate it.

2. Learn from Successful Investors

Even successful investors have gone through difficult times at the end of this century. I have spoken with many of them, and only a small portion believed they could grasp the market situation in 1996 when stocks were rising continuously.

However, their experiences and lessons are enlightening to us at any time.

Those successful investors all lead to success.

Louis Rukeyser valued emerging industrial growth, thus achieving success;

Ben Graham respected the laws of fundamental value;

Warren Buffett diligently studied the experiences taught by his professor Ben Graham during his time at Columbia University; George Soros applied his theoretical ideas to the international financial field;

Jimmy Rogers discovered defense industry stocks and shared his thoughts and analysis with his boss Soros.

Each of them achieved great success in their own way.

3. "Sheep Market" Thinking

You can learn from the experiences of successful investors, but do not blindly follow them. Because your personality and needs are different from others. You can draw lessons from both success and failure, selecting what suits you and your surrounding environment.

The influence of individual investors on a stock can sometimes cause it to fluctuate by 10 percentage points, but that is just a moment, generally lasting a day and not exceeding a week. This market is neither a bull market nor a bear market. I call such a market a "sheep market."

Sometimes the flock may be slaughtered, and sometimes they may be sheared of their wool. Occasionally, they can escape and keep their wool. The "sheep market" is somewhat similar to the fashion industry. Fashion masters design new styles, second-rate designers imitate them, and millions of people chase after them, causing skirts to fluctuate in length.

Do not underestimate the role of psychology in stocks; buyers are often more anxious than sellers, and vice versa. Apart from economic statistics and securities analysis factors, many factors influence the judgments of buyers and sellers, and a small headache can lead to a wrong trade.

In a sheep market, people tend to think about what the majority will do. They believe that most people will surely find a favorable solution despite difficulties. This way of thinking is dangerous and can lead to missed opportunities. If one imagines that most people are a collective group, they may sometimes drag each other down and become their own victims.

4. Adhere to Long-term Thinking

Focusing on short-term investments can easily overlook the importance of long-term investments. Companies often invest large amounts of capital in long-term investments, which will naturally have short-term effects. If short-term effects dominate, it will harm the company's development and prospects.

Profits should be based on long-term investments, effective management, and seizing opportunities. If these are arranged well, short-term investments will not take a dominant position.

When a popular stock is analyzed from a small perspective, if it fails to meet its targets for a quarter, market panic can cause the stock price to drop.

5. Timely Entry and Exit

When is the right time to enter the market to buy stocks? When is it suitable to sell stocks and observe from the sidelines?

Timing may not determine everything, but it can decide many things. What could have been a good long-term investment can turn bad if bought at the wrong time. Sometimes, if you buy a highly speculative stock at the right time, you can also make money. Excellent securities analysts can perform well without following market trends, but it is easier to operate when moving with the tide.

A speculator or investor often succeeds because they invest a large amount of capital to buy when the market is weak, allowing them to acquire more stocks for the same amount of money. Conversely, investors sell stocks at high prices in a strong market; although the number of stocks sold may not be large, they can earn a lot of money. This principle is simple. Grasping favorable opportunities relies partly on intuition and partly on the opposite. The selection of timing must depend on one's independent thinking. In economic operations, an upward trend may arise during a downward trend, and a recession can begin from a peak.

What is the importance of intuition? The great economist Paul Samuelson believes that the stock market "has made eight forecasts during the past three major recessions," which is completely correct. Therefore, momentary intuition is almost as important as the ability to analyze securities.

Timing is subtle and very meticulous. If you short-sell at the wrong time (during an upward trend), the cost will be expensive. Ask those who shorted stocks like Lydon, Telecom, Levitz Furniture, and Montgomery Ward; they did nothing wrong but were out of sync with the timing and sold too quickly. I know someone who lost everything by short-selling at the peak of the bull market in the summer of 1929 and only managed to get back into the market in the fall.

Bull markets generally last longer than bear markets. During a bull market, stock prices grow slowly and irregularly, possibly even more irregularly than in a bear market. Bear markets, on the other hand, are short and characterized by violent fluctuations. However, the market ultimately follows certain patterns; the stock market rarely rises for more than six consecutive months and rarely falls for more than six consecutive months.

Additionally, some investors, upon seeing loss reports, immediately close their positions without assessing the current situation. In nine out of ten cases, the stocks sold in such situations are actually ones that should be bought rather than sold.

In such situations, what people should first learn is that the market does not care about individual behavior. The price you pay for securities is not unreasonable. It is quite difficult for people to understand the strange pricing and value reassessment theories, and it is not just amateur investors who fail to recognize this. Many investment advisors believe that long-term investments should be made in utility stocks.

However, they hold onto a stock for too long; I believe that when stock prices rise to a relatively high level, regardless of whether it is for retirement funds set up for government employees, teachers, or others, it should be sold.

Although stock prices have not yet reached their peak, if you are in profit, it is better to exit.

Bernard Baruch is the investor who best grasps timing; his philosophy is to seek to do well but not to be greedy. He never waits for the highest or lowest points. He buys in weak markets and sells in strong markets. He advocates selling early. Our company is honored that he became our client in his later years.

At certain times, ordinary stocks are the best investment, but at other times, perhaps real estate is the best. Everything changes, and people must learn to adapt. I completely do not believe in the existence of a permanently unchanging industry.

6. Seriously Analyze Company Conditions

It is essential to seriously study the company's management conditions, leadership, company performance, and company goals, especially to carefully analyze the company's true asset situation, including: equipment value and net asset per share. This concept was widely emphasized at the beginning of the century but has since been almost forgotten.

The company's dividend distribution is also very important and needs to be considered. If its distribution plan is appropriate, its stock price can rise to another level. If a company distributes 90% of its profits, be aware that this is a dangerous signal; it may not distribute next time; if a company only distributes 10% of its profits, this is also an alarm; generally, a company's distribution plan is to distribute 40% to 60% of its profits. Many utility stocks have even higher dividend payout ratios.

Many investment institutions do not really value dividends, but individual investors regard dividends as an important way to increase income.

What are growth stocks? Their savvy followers discover their potential value early in the company's development. However, generally speaking, a company's brand is recognized only after it matures. Growth is slow, and both individuals and institutions continue to buy its stocks because people's predictions are relatively realistic.

People spend too much energy on assumed growth. This does not take into account economic recessions, the outbreak of wars, government reassessments of growth indices, and changes in the growth indices themselves.

A stock's price-to-earnings ratio rarely stays around 15 times because people's expectations for the company's prospects will exceed this price-to-earnings ratio—this idea is not necessarily correct. We know there will be exceptions, but unexpected opportunities are only 1%. So this whim affects you, causing people to buy stocks at high prices when the price-to-earnings ratio is high.

I accept a price-to-earnings ratio that exceeds 10-15 times for high-performing companies. Many of them have price-to-earnings ratios between 6-10 times, which is beneficial for both of us.

If you can control the overall market price of a certain company, you can gain more profits from it.

Seven, Don't Fall in Love

In this adventurous world, because there are many possibilities, people can become obsessed with a certain idea, a certain person, or a certain ideal. In the end, what can make people obsessed is probably stocks. But it is just a piece of paper that proves your ownership of a company; it is merely a symbol of money.

Eight, Diversify Investments, But Don't Hedge Trade

Hedging trade means going long on some stocks and short on others.

Professionals use hedging trades to avoid risks in the daily market, but sometimes new entrants to the market see hedging trades as just a gamble. I do not advocate this. But there is no law prohibiting it.

Hedging trades are indeed a revolution in modern stocks. A century ago, when you bought the same stock from the New York and London markets, the price difference between the cities was minimal. Experts would buy a stock in one market and sell it in another, making little profit but still earning.

The profit and risk factors are lower compared to today's stock market. But believe me, today's stock market is quite risky.

If you insist on hedging trades and are confident that experience can help you, remember to diversify, take a holistic view, and ensure your rules are correct. If you want to diversify your investments, you should try to increase your income, such as capital.

Nine, Observe the Surrounding Environment

What I mean by environment refers to market trends and the overall world environment. You need to adapt the patterns I give you to fit the operations of the market you are in.

In market assessments, you should pay more attention to percentage changes rather than absolute numbers. A drop of 100 points may seem significant, but it could only be 2% of the index.

Paying attention to the market allows me to discover when the market begins to decline and when it starts to recover. This also frequently gives investors opportunities to invest in so-called conservative aspects, such as short-term zero-coupon treasury bonds, long-term treasury bonds, and treasury bills Short-term zero-coupon treasury bonds are the main investment direction for large investors. They are safer than any other investment and even safer than putting money under your pillow. You don't need economists to tell you how to study interest rates; nothing is more important than predicting market trends. The trend of interest rates is the same; the sluggishness of long-term interest rates can illustrate the severity of the economic situation better than any other fact. Generally speaking, if short-term and long-term interest rates start to rise, it is telling stock investors: the upward trend is coming.

Stocks are not seasonal, and it is unnecessary to invest according to the calendar. Remember, for investors, any time is risky. For those who enjoy life and the joy of investing, although the seasons may change, opportunities are always present.

10. Don't Stick to Conventional Wisdom

It is necessary to change your way of thinking according to the changing situation. My view is that you should proactively change based on economic and political factors. As for the technical aspects, sometimes we can control them, but sometimes they are beyond our control.

I am good at bearish thinking, and I sing against optimists. However, if most people are pessimistic, I will do the opposite and adopt a bullish mindset; conversely, I will also engage in hedging trades.

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