Recently, I watched an early interview video of Lin Yuan, and the viewpoints in the video can be summarized in two sentences:

“Use a full position to guard against the risk of missing out, and use stock selection to guard against the risk of decline.”

This statement may seem quite radical at first glance, and even leave one a bit baffled, but if we set aside Lin Yuan's typically rough style of speaking and think deeply, it reflects a mindset focused on investment and avoiding speculation.

For many investors, when reflecting on their past experiences and lessons, the most common mention is: I had high hopes for XX, but I didn’t buy/was in cash, and then I watched XX soar all the way, completely missing this round of the market.

In the interview, Lin Yuan mentioned a phenomenon that I have also seen in other materials or interviews, and have deeply felt during these years of experience:

A target truly experiences a significant rise only 5% of the time, or even less; for the other 90% or more of the time, it either moves sideways or declines.

If an investor misses that 5% significant rise (assuming that target has no cash dividends), then they essentially miss out on the most substantial returns of that target.

Therefore, if a target has no cash dividends and investors can only benefit from its significant rise, they must ensure they capture that 5% rise.

In response, some might say, then use technical analysis to observe market trends and buy just as that 5% rise is about to start.

But for some investors (like me), technical analysis does not suit them, or they cannot grasp that method; what should be done then?

Lin Yuan's method is to hold a full position and wait consistently.

He also specifically mentioned a phenomenon he observed: almost everyone around him who is not in the market during a bear market (not holding a position) will not make money when a bull market arrives or is certain to miss that 5% significant rise.

Combining my own experience, I would prefer to slightly modify his statement: it is not about holding a full position, but rather after assessing the bearable risk, holding money that one can afford to lose. The approach to holding is to gradually strengthen the position through setting a fixed investment price for gradual investment.

Next, the host asked a more direct question:

So when we clearly feel that the trend is going to decline, how do we prevent this decline without selling?

Lin Yuan's reply was: If you sell just because of this feeling of decline, you may very likely never be able to buy back in and will miss out.

Thus, the method to counteract a decline is not to sell, but to choose well beforehand, selecting a good and valuable target.

Because a good target, even if it declines, will still rise again in the future, so there is no need to worry about its current decline.

Additionally, Buffett, Munger, and Duan Yongping have all said similar things about declines.

Buffett:

“If you cannot tolerate a 50% drop in stock prices, you should not be trading stocks.”

“If owning the stocks you have causes you extreme discomfort when they drop more than 50% in a short time, then you really should not hold stocks.”

Munger:

“If you cannot calmly face a 50% drop in the stock market, then you do not deserve to be a common stock investor; you will earn the mediocre returns you deserve.”

“If you cannot tolerate a 50% drop in stock prices, you are not really suited for investing in stocks.”

Duan Yongping:

“If you can't withstand a 50% drop in a stock, you shouldn't buy it.”

Therefore, regarding declines, my viewpoint is: if you are indeed confident in selling just before it drops significantly and can ensure you can buy back in later at a lower price, then you can operate this way.

Otherwise, for a valuable and promising target, it is better to withstand the decline and maintain a good position.

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