Long-termism and Reverse Thinking: Four Core Concepts You Must Know About Fund Investment

In recent years, public mutual funds have increasingly become an important tool for the general public's wealth management. However, the phenomenon of "funds making money while fund investors do not" remains prominent. The key to this issue often lies not in market fluctuations, but in deviations in investment philosophy. Only when the philosophy is correct does the method hold meaning; if the philosophy is skewed, no amount of effort will yield returns.

I. Abandon the get-rich-quick mindset and face reasonable returns realistically

The essence of fund investment is to obtain dividends from long-term economic growth through professional management, rather than serving as a short-term speculative tool. Many investors enter the market with a "get rich overnight" mentality, expecting substantial returns in the short term. The result is often chasing highs and selling lows, along with frequent trading, which ultimately backfires. The correct approach is: invest with spare money, wait patiently, and let time be your friend.

II. Believe in the power of compound interest and persist in holding for the long term

The magic of compound interest does not lie in how high the rate of return is, but in having a sufficiently long time horizon. As returns are continuously rolled into the principal to generate further interest, wealth can grow like a snowball. However, what truly tests investors with compound interest is the resolve to withstand volatility. Markets inevitably experience oscillations and drawdowns; only by extending the investment cycle can one use economic growth to smooth out short-term fluctuations. Many investors do not choose the wrong products but lose because they "cannot hold on"—panicking and exiting the market, turning floating losses into realized losses.

III. View short-term performance rationally and emphasize long-term verification

Annual performance rankings are a focal point of the market, but products that rank highly in the short term often perform mediocrly or even suffer significant drawdowns in the following year, a common occurrence. The reason is that short-term performance is heavily influenced by market styles and accidental factors. What truly measures a fund manager's ability is resilience through bull and bear markets—the skills in stock selection, timing, and risk control—which can only be fully verified over a three-to-five-year dimension. Short-term rankings can serve as a reference, but final decisions must be made by comprehensively considering long-term performance and drawdown control.

IV. Avoid five major pitfalls to bring investment back to rationality

In practice, investors repeatedly fall into several typical pitfalls: First, blindly following the crowd, entering at market highs and exiting at lows, doing exactly the opposite of what is needed. Second, ignoring signals such as changes in fund managers or style drift after purchasing. Third, allocating products beyond one's own risk tolerance, focusing only on returns while ignoring volatility. Fourth, frequent trading; given the lag in fund net value disclosure and non-trivial fees, the success rate of short-term timing is extremely limited. Fifth, buying high and selling low; entering excitedly during market frenzies and hastily exiting during panics, going against the law of value. The rational approach is: dare to position at low levels, remain cautious at high levels, and use contrarian thinking to counter human weaknesses.

Conclusion: Investment is a cultivation of cognition. Funds are tools, but philosophy is the decisive factor. Have less impatience and more patience; less conformity and more independence; less shortsightedness and more foresight. When the correct philosophy is internalized, time will naturally stand on the side of the investor.