How to Invest in Stocks

This is a historical learning note and may contain outdated or incomplete understanding.

1. Keep a Stable Mindset

2. Risk

Liquidity risk is still risk. Individual investors also need to consider market depth, trading halts, extreme markets, and market-impact costs when selling large positions.

3. When to Stop Losses

For technical analysis, stop loss when the loss exceeds 10%.

For a fundamentally driven position, if the fundamentals deteriorate, sell quickly. Avoid falling into loss aversion.

Do not take profits too easily.

“Leek” behavior: keep losing stocks and sell the profitable ones.

4. When to Add to a Position

If the price falls but the business has no problem, add to the position. Do not fear short sellers in a good company; do not add simply because the price is rising. A limit-up move does not necessarily mean sell; sell when there is a bubble in the original framework. How to judge whether a stock has a bubble?

An extremely low dividend yield together with no buyback.

5. Diversification

Jinyuan Shunan Yuqi: micro-cap stocks, highly diversified. If it underperforms the benchmark, leave quickly.

How many stocks should be held?

Capital below RMB 500,000: concentrate in 3-5 stocks and choose higher-expected-return growth stocks.
Capital from RMB 500,000 to 5 million: hold 5-10 stocks, with small-cap growth and large-cap blue chips at 60% / 40%; investors with higher risk tolerance or professional ability can still concentrate in 3-5.
Capital above RMB 5 million: hold around 10 stocks, with at least 40% in stable-growth/high-dividend blue chips depending on risk preference, or allocate that part directly to a CSI 300 ETF.

How Many Stocks Should Retail Investors Hold? - Zhihu

6. Valuation

Valuation How to Analyze a Company (original VNote internal link; not migrated yet)

7. IPO Subscription

IPO Subscription