Self-Questioning and Answering About Investment Mindset

Mindset Issues in Investing

I started investing from late 2018 to early 2019. Possibly because of my cautious personality, I initially focused on low-risk investments. At the same time, I entered the market at a relatively good time, so my investment journey has been quite smooth overall. Due to these two factors, my drawdowns have been relatively small. Roughly speaking, the largest drawdown occurred from late 2023 to January 2024 during the bond market crash, with about a 10% decline. At other times, I have rarely experienced more than a 5% drawdown. From February 2024 to February 2025, I had 25 consecutive months of profit, with a maximum drawdown of 3.7% in September 2024, and the full-year maximum drawdown in 2025 was only 2.7%. Meanwhile, the return in 2024 was 42%, and in 2025 it was 36%.
In terms of capital size, thanks to these gains and the “recharge method,” my account balance has grown from less than 1 million at the start of 2022 to eight figures now. In fact, the daily fluctuations now can exceed my entire annual earnings in 2019 and 2020.
When conducting risk tests for brokerages, I often set the risk level to aggressive, but in reality, I tend to seek investment opportunities in highly volatile products—I consider my approach as arbitrage-based investing. Arbitrage relies on event-driven opportunities, which typically have short cycles, so my trades are mostly short-term, resulting in relatively low volatility. Of course, I still hold many positions, mainly stocks and convertible bonds in a “pancake” manner. However, as my capital grew and the index levels increased, my holdings of stocks and convertibles decreased, and my account volatility increased. I have yet to fully adapt to this current level of account fluctuation.
Actually, in absolute terms, my account volatility is quite small; it’s just that with larger capital, this volatility becomes more noticeable and somewhat troubling.
People often say that the main emotional hurdles in investing are fear and greed. Currently, I tend to feel fear during downturns and greed during upswings. To change this, I need to return to meticulous research—reducing my core positions and seeking suitable opportunities with an arbitrage mindset.

Solution: Total position size 100%, no leverage, no financing, adhering to the core logic of “steady core holdings for peace of mind, arbitrage for profit.”

1 Set a core position, follow beta, maintain stability

(1) At current valuation levels, set a long-term holding limit of no more than 6 million yuan (not 60% of portfolio; future gains will be kept in cash).
(2) Among these, dividend stocks, arbitrage stocks, etc., should not exceed 2.5 million yuan; convertible bonds no more than 3 million yuan; gold, US stocks, crude oil, etc., no more than 500,000 yuan. The proportions among these can be adjusted flexibly.
(3) Regularly review holdings and make reasonable adjustments.
(4) Use grid-based algorithmic trading to enhance returns on holdings.

2 Flexible capital, earn alpha, long-term compound growth

(1) The remaining funds are mainly in flexible cash, used for intraday trading. Intraday trading, which I call “all-in” strategy, aims to increase short-term gains within the day.
(2) When doing short-term trades, especially with funds and short-term stocks, avoid turning short-term trading into long-term holding.
(3) Several short-term trades this year contributed at least half of my profits, with almost no failures.

3 Avoid comparisons, stay calm, focus on yourself

(1) Don’t compare your returns with others, because you don’t know if their returns are real or if their risk tolerance matches yours.
(2) I personally manage all family funds, while many families only invest a small portion of their assets.
(3) Only buy assets with a solid foundation; only then will I dare to buy more during dips.

4 Focus on things beyond intraday volatility

(1) Embrace AI and learn about AI.
(2) Read books: on investing, history, economics.
(3) Take care of your health and exercise more.