The financial literacy of the post-80s generation, in theory, should far surpass that of the post-60s and post-70s generations. They meticulously safeguard their wealth and strive to seek financial methods for preservation and appreciation, but this is not easy.

A proverb goes: "Investing is not just an act, but something that carries philosophical implications." Investing is a process of taking risks in exchange for returns, and uncertainty is the only certainty before the results are revealed. Even bank deposits are not 100% safe. In fact, the domestic "Deposit Insurance Regulations" only guarantee deposits of up to 500,000 RMB per individual (enjoying sovereignty-level security), and personal bank deposits exceeding 500,000 RMB still face the credit risk of the deposit bank.

Therefore, financial investment is a very complex matter. No amount of experience or lessons can universally guide our practical actions, not even the well-intentioned words of investment masters. However, financial investment is also a very simple matter; one can achieve good results by following a few limited principles.

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For example, act within one's circle of competence, do what one is familiar with, rather than easily heeding so-called experts' opinions; also, diversifying investments can prevent catastrophic consequences from investments, and one should not easily use the domineering approach of "All in."

Here, we record the financial investment experiences of several post-80s individuals over the past decade for our circle of friends to read and refer to.

What is learned from books is ultimately superficial.

Jerry is a Master of Finance from Peking University's Guanghua School of Management. The year he graduated coincided with the 2008 subprime mortgage crisis, when the growth rates of major global economies plummeted, and the job market was challenging.At the mid-year closed-door briefing held by the China Banking Regulatory Commission for commercial banks nationwide, the presidents in attendance generally held a pessimistic outlook for the future. However, the president of Shanghai Pudong Development Bank believed that this was an unconventional opportunity for growth and stated that they would increase credit allocation in the second half of the year, expanding counter-cyclically. Expansion meant a need for personnel, and Jerry was fortunate enough to secure a job at Shanghai Pudong Development Bank.

In November of that year, the Chinese government introduced ten measures to further expand domestic demand and promote steady and rapid economic growth, planning to invest 4 trillion yuan to counteract the risks of external demand contraction. Shanghai Pudong Development Bank seized the initiative, with a net profit increase of 127.6% year-on-year in 2008, a performance that was unparalleled at the time.

Jerry joined the Investment Banking Department of the Shanghai Pudong Development Bank's headquarters, earning a high salary that was the envy of most of his peers, and naturally, he had surplus funds. This led to the emergence of the need for investment and financial management. As a finance graduate with systematic training, Jerry was very confident, thinking that he had mastered the Markowitz Portfolio Theory and the Black-Scholes Equation, and was sure to start a successful career like Feng Liu (Note: here it refers to the myth of amateur retail investors creating superhuman investment performance).

After more than a year of calm research and observation, Jerry plunged into the stock market in mid-June 2010, after receiving his first year-end bonus in life.

Jerry carefully selected and purchased five A-share stocks: Palm Garden, PetroChina, GF Securities, Guangsheng Materials, and Haixiang Pharmaceutical, creating his first investment portfolio. When the position was established, Jerry was overjoyed, dreaming of daily red card blessings, continuous positive lines, and a rapidly changing account net value.

However, Jerry's wealth did not grow over time. Although his portfolio once had a paper profit of 50%, as time passed, the paper profit turned into a paper loss, the paper loss turned back into a paper profit, and then the paper profit turned into a paper loss again. These ups and downs shattered Jerry's confidence.

"If this portfolio had been held until today, my return would be negative," Jerry said with a sigh.

Apart from Haixiang Pharmaceutical, whose stock price has roughly doubled in the past 10 years, the current market prices of the other four stocks are all lower than the purchase prices at that time. The worst is PetroChina, which has fallen from over 15 yuan to just over 8 yuan (adjusted for rights), a drop of nearly 50%. The stock prices of Guangsheng Materials and Palm Garden have also dropped by twenty to thirty percent over the past decade, while GF Securities has incurred a slight loss.

Of course, Jerry is still fortunate, at least he doesn't have to mock himself with the saying, "How much sorrow can one have? It's just like being fully invested in PetroChina at 48 yuan."

Jerry sighed, "My judgment is nothing special, completely defeated by time." Investing is not easy, and what is learned from books always feels superficial. The financial training he received in college did not support Jerry's ambitions in the stock market. On the contrary, Jerry was just an inconspicuous blade of leek among many. In order to buy a house, Jerry stopped investing in the stock market from 2013, and after paying off the monthly mortgage on time, he had limited spare money, and his interest in investment and financial management faded a lot.In 2019, Jerry made an early repayment of part of his mortgage loan and still had some funds left, which reignited his interest in investing in the stock market. However, he was uncertain about how to proceed.

On one hand, bearish factors such as economic downturn and trade conflicts led to a continuous decline in the A-share market. The average PB of the CSI 300 Index had already dropped to 1.47, which was at the 28th percentile in history (meaning that 72% of the time in the history of A-shares, the PB weighted value of this index was higher than 1.47). It seemed like this should be a rare opportunity for investment!

Over the years, Jerry had learned the new concept that contrarian investment could bring excess returns. But when it came to actually making a move, Jerry didn't know what to buy.

After reading various strategies and flipping through numerous theoretical and grassroots books, Jerry made a bold decision to divide his money in half, investing one part in a well-known active stock fund and the other part in the "CSI 500" index fund.

"I believe that the long-term development of the national economy will eventually be reflected in the stock market returns. While I am still young and my income exceeds my expenses, I might as well make friends with time and let Mr. Compound Interest make money for me," Jerry said with a smile, his eyes filled with hopeful light.

Jerry was clear that the returns of index funds come from the long-term profitability of listed companies, essentially betting on the country's fortune. As for whether the active investment funds were correctly invested, it would depend somewhat on luck. This is because the excess returns of active funds mainly come from the investment talent and performance of the fund managers, which are difficult to control in advance. Good past investment management performance does not necessarily guarantee future success. There are plenty of investment masters who were once brilliant but eventually failed, such as Julian Robertson, who managed the Tiger Fund with outstanding performance in the early days but ended up being forced to liquidate.

Therefore, many domestic public funds must make a serious risk warning: "Past performance is not indicative of future results."

When husband and wife are of one mind, their combined strength can cut through metal.

Tom and Jerry were roommates in graduate school, and after graduation, they returned directly to their hometown because there was a beautiful young lady who had been their childhood sweetheart. When they got married, the parents of both sides pooled their resources to gift the newlyweds a 180 square meter three-bedroom apartment, completely relieving Tom of the pressure to buy a property.The couple's income, after deducting daily expenses, is entirely invested in the stock market. This is because Tom has eloquently demonstrated to his wife with historical statistical data that, in the long run, the stock market's returns overwhelmingly outperform both long-term and short-term bonds as well as gold, making it the best investment option.

Professor Seigel from the Wharton School of the University of Pennsylvania has shown that, adjusting for inflation, the profit performance of major U.S. asset classes from 1802 to 2012 is as follows:

- The total return on stocks is 1,033,487 times, significantly higher than the nominal GDP growth of 33,751 times, with an annualized compound real return of approximately 6.6%;

- The total return on long-term bonds is 1,642 times, with an annualized compound real return of about 3.6%;

- The total return on short-term bonds is 275 times, with an annualized compound real return of about 2.7%;

- The total return on gold is 3.12 times, with an annualized compound real return of about 0.7%;

- The total return on cash is -95%, with an annualized compound real return of -1.4%.

As for the much-debated investment in real estate, according to the Case-Shiller Home Price Index, in the past 123 years, the nominal annualized compound growth rate of U.S. housing prices is 3.07%. After accounting for the 2.82% inflation rate, the real annualized compound return on U.S. housing prices is only 0.25%. This means that, after adjusting for inflation, U.S. housing prices have essentially not increased in value, and their worth beyond living in them is merely to offset the erosion of purchasing power due to inflation (the situation may not be the same in China and the U.S., as historical inductive reasoning has clear flaws, but whether there are common patterns remains to be further studied).

Trusting in Tom's expertise and knowledge, his wife has appointed him as the portfolio manager, taking on the responsibilities of research analysis, investment decision-making, and trading all by himself.

Since entering the market in 2009, over the course of four years, Tom has been diligently pursuing wealth through stock market investment. Outside of his 8-hour workday, he devotes a significant amount of time and energy to studying the stock market, covering everything from macroeconomics to industry intelligence, and down to the business models and operational performance of listed companies.In addition, he delved into the methodologies of various schools such as technical analysis, value investing, and trend investing, and furthered his skills in CPA and CFA regarding stock investments.

However, his investable performance was quite embarrassing, with significant fluctuations in the net value of his account and an overall negative return. Taking into account the factor of high inflation, the purchasing power represented by the market value plummeted. As a result, his wife was extremely angry, blaming him for his lack of competitiveness, and demanded that Tom be stripped of his position as the family's portfolio manager. Tom, however, defended himself assertively, arguing that the Shanghai and Shenzhen stock indices were in a bear market from 2010 to 2013, with the Shanghai Composite Index falling from 3478 points in August 2009 to 1849 points in 2013, a total decline of 46.8%, while the nominal loss of the family account was less than 10%, significantly outperforming the broader market. This is not a fault of the battle!

After some negotiation, Tom and his wife decided to co-manage the stock account, with the net assets being split 60/40, and future income corresponding to cash surpluses also being split 60/40, with Tom managing the larger share.

Recently, they calculated their overall account and found that since the separation in June 2013, the total return of the family's stock account was 240%, with the account managed by the wife contributing 85% of the total return, while Tom's contribution was only 15%. Despite starting with less capital, the current total market value of the wife's account is twice that of Tom's.

Although the results seem to speak for themselves, Tom has never been convinced of his wife's stock investment skills. In Tom's view, his wife's investment strategy is not worth mentioning, as she simply bought Moutai without any concept of portfolio diversification or position management, which is too simplistic. Today's performance is largely due to luck.

Back in mid-2013, when his wife bought Moutai at a price of over 180 per share, it fell to 128 by the end of the year. He repeatedly advised his wife to reduce her position and trade in waves. However, over the course of five years, his wife relied solely on the buy and hold strategy of Moutai, achieving a fourfold return, compared to which his account's surplus was only about 30%.

Over the five years, due to the increasing performance gap, disputes over the management of funds also arose. The wife demanded more control over the funds, but Tom was adamant in his refusal. Tom's opposition was well-founded, as yesterday's investment performance and tomorrow's investment performance are independent events; the wife cannot guarantee future success just because she has done well in the past, so reallocating funds based on this is dangerous. Moreover, he simply does not believe that Moutai's stock can continue to rise.

Over the years, he has continually questioned the future of Moutai, advising his wife to take profits and switch to another company after each significant increase in the stock price. Now that Moutai's share price has broken through the thousand-yuan mark, Tom has started advising his wife to sell Moutai again, arguing that the valuation is too expensive, with a price-to-earnings ratio exceeding 30 times, and the implied earnings growth expectations are too high to be realized, and so on.

His wife, however, has become accustomed to this and turns a deaf ear. This is because her philosophy is unshaken; as long as her father-in-law and father still love to drink Moutai and are willing to spend a lot of money to buy Moutai for celebrations, she will not sell. She doesn't consider valuations because there are too many factors to consider, and she simply cannot keep up. What market sentiment and emotions, she can't figure it out, so it's better not to care at all. As an engineering student, she believes in logic and the principle of Occam's Razor, which means that decisions supported by the least amount of information are of the highest quality.

Life has taught her that people are willing to pay a premium for Moutai, and there must be a substantial reward. Just as in "Peter Lynch's Successful Investing," Lynch mentioned a similar example where his wife was crazy about L'eggs pantyhose and was willing to pay a high price for them, so Lynch bought shares in the L'eggs manufacturer. Later, L'eggs became the best-selling pantyhose in the United States, and Lynch made a fortune.Tom still tirelessly lingers on a stock-specific vertical social media platform every day, collecting a vast amount of information, then extracting and refining it, and finally, with great care, locks in his investment targets based on this. He firmly believes that his investment philosophy has been thoroughly sublimated, becoming increasingly mature, and is certain to achieve returns that far exceed the average level of the market.

Recently, Tom has had a new idea and is optimistic about the long-term growth potential of the insurance industry and daily consumer goods. He quietly added Ping An of China, Fuling Zhacai, and Haidilao to his portfolio. Whether these choices are right or wrong can only be tested by time.

His wife, however, only focuses on Moutai, with an iron will, and as long as the production and per-bottle price of Moutai do not fall simultaneously, she will stubbornly adopt a buy and hold strategy.

From relying solely on insurance to a diversified allocation, Nancy has been working at one of the Big Four accounting firms for nearly 12 years in the audit field and is expected to be promoted to senior manager next year. Her career progress is neither fast nor slow among her peers.

Nancy is a simple person who dislikes making choices, so after her ex-boyfriend became a life insurance consultant, insurance naturally became Nancy's only choice. Insurance has both a protective function, helping us combat natural disasters and accidents; and it can also professionally invest, compounding value and appreciation. Therefore, Nancy believes that insurance can solve all financial needs in one stop.

When she first started working, she didn't have much money and could only afford to buy a commercial pension insurance policy for her mother, who did not have social security, with an insurance amount of 300,000. As a result, her mother could receive 30,000 yuan per year from the age of sixty to eighty (with a death benefit clause). Nancy remembers very clearly that it was the year 2009, and her mother was already 53 years old, close to the upper limit of the insurance age, so the premium for a 10-year term policy had to be paid monthly at a high rate of more than four thousand, which directly depleted Nancy's salary surplus.

Later, as Nancy earned more and said goodbye to her ex-boyfriend, her habit of buying insurance did not change, but she gradually expanded the insured to include her father, herself, her husband, and her son, purchasing critical illness insurance and savings-type whole life insurance, among others. It was not until 2015, when Nancy went to the United States for further studies and learned new knowledge and experiences, that she re-examined her investments and suddenly realized the unreasonableness of over-investing in insurance.

The greatest function of insurance lies in protection, that is, providing economic compensation after various risk accidents occur in our lives to prevent our quality of life from fluctuating greatly. As for the investment function, the role that insurance can play is not significant. Therefore, when buying insurance, one should opt for consumer-type insurance.

In the past, to pay less premium, Nancy originally only wanted to buy a supplementary medical insurance for her husband, but she ended up buying a savings-type whole life insurance with a medical insurance attachment. Looking back now, it was a complete decision-making error. To achieve the same goal, Nancy could replace it with a combination of medical insurance + term life insurance + long-term S&P index funds, which would most likely be much more cost-effective.The long-term returns of future S&P index funds are highly likely to significantly outperform the rates of return offered by savings-type life insurance. After covering the expenses of consumer-type term life insurance and medical insurance, there is still a considerable surplus (Note: The S&P is used as an example here because it has a long enough historical cycle with enough observation periods for evaluation, and this does not deny the long-term return capability of the large A-shares market).

Insurance is not the best tool for compounding personal wealth growth because the losses are too great. After deducting the commissions of insurance advisors, the amortized operating costs, and so on, the actual amount of the premium paid that can be used for investment is significantly reduced. Additionally, insurance companies, constrained by regulatory requirements and their own prudent operational strategies, tend to be very conservative when investing premiums, making it difficult to achieve excess returns. Therefore, the compound growth result of the same amount of money invested by an insurance company is likely to be outperformed by stock funds.

In a nutshell, the primary function of insurance lies in protection, rather than being conducive to the purposes of savings and investment.

Due to her profession, Nancy is proficient in Excel. After calculating the premiums paid and the pension her mother received, she found that the compound return on the pension insurance she bought for her mother was only a little over 3%, far behind inflation, which made her feel wronged. After returning to her home country, Nancy no longer buys insurance, and the couple's surplus cash is all invested in bank guaranteed floating income wealth management products, aiming to steadily accumulate a larger base for alternative asset investments.

Nancy is still willing to purchase consumer-type insurance such as term life insurance and medical insurance, but she will no longer choose any investment-type or savings-type insurance. As Nancy and her husband's promising career prospects gradually materialize, such as Nancy becoming a partner of a foreign enterprise in China, their income will take a significant leap, and there will be more surplus money for investment, which should be enough to reach the investment threshold of high-end private equity funds (the target clients of well-known PE managers are high-net-worth individuals). Therefore, Nancy and her husband have already begun to research the "Forbes China 2018 Best PE Institutions TOP30" list, preparing for the selection of a satisfactory manager in the future.

The mismatch between risk preference and risk identification ability leads to a significant defeat.

Grace's family is in Dalian, and she is a shrewd office lady. Her husband is a "programmer" in the Dalian software outsourcing industry, who writes code at work and plays games with his children after work, not caring about other household matters, leaving the financial responsibility to Grace.

Grace's earliest financial tool was "bank notice deposits." In 2006, when Grace had some liquid money, she found that the interest rates on bank notice deposits were higher than those on demand deposits and money market funds, making them an excellent tool for liquidity management. Since then, all of Grace's investments have been centered around fixed-income products because Grace does not understand the stock market and cannot stand the fluctuation of stock prices. She positions herself as a low-risk investor who cannot afford to lose principal.

Later, with the advent of bank wealth management, Grace compared different options and chose the ones with the highest returns for the same period. Her financial knowledge also grew steadily, and in 2011, Grace even invested in the B shares of innovative structured bond funds, which yielded very high returns (the net value of a certain Huili Fund B share increased from an initial net value of 1 yuan in 2011 to 2.34 yuan in 2016). However, by 2017, regulatory policies began to restrict such leveraged structured funds. Forced to turn to other channels, Grace still felt a sense of achievement with over a million in financial assets.

One day, while discussing financial management with a close friend, Grace discovered that P2P lending had become popular. The returns for lenders were astonishingly high, with no difficulty in achieving over 12% for one-year loans. After comparing different platforms, Grace found that there were plenty of platforms offering 20% returns for lenders with terms over one year. This immediately ignited Grace's investment enthusiasm. She divided her money into 15 equal parts and invested in different P2P matchmaking platforms, focusing on those with high lending interest rates, the higher the better.In pursuit of higher interest rates, Grace extended the term of her loans increasingly. When she realized the risks were not aligned, she attempted to transfer the debts or cash out, but it was too late. As the story unfolded, P2P companies experienced a widespread collapse, and Grace was caught in the fallout. She was unable to recover loans on several platforms as scheduled and is still in the process of trying to collect. Fortunately, the total loss to her principal was less than 15% (other timely withdrawn loans from other platforms had high annual returns, which offset some of the losses). However, the emotional toll was significant. When going out, Grace often experienced illusions, feeling that the world was detestable due to the prevalence of bad actors. The platforms were frauds, and the borrowers were frauds too!

Grace is capable of learning and reflecting. Upon introspection, she identified a mismatch between her risk preference and her ability to identify risks. In fact, from the beginning when she invested in the B-class shares of graded bond funds, the investment risks she undertook had already increased, deviating from her internally set risk tolerance limits without her realizing it, seeing only returns and not risks.

Later, her foray into P2P was an act of letting go. She didn't understand the risk and reward distribution model of P2P at all, blindly betting without the ability to discern the risks involved, which naturally led to bitter consequences. Over 200,000 RMB vanished in an instant, forcing Grace to tighten the family's belt and live frugally to try to make up for the loss. Just as there is a circle of competence in stock investing, there is also one in fixed-income investments. Relying on the illusory belief of "guaranteed redemption," which can be shattered at any moment, inevitably leads to failure. In investing, the duty of self-management can never be neglected. Fortunately, a diversified investment strategy spared the family's wealth from total disaster, a principle that must continue to be upheld. Many families have survived this P2P catastrophe through their own resilience.

Additionally, her investment strategy can be adjusted. After all, both spouses are still young and capable of withstanding short-term fluctuations and paper losses. Increasing the risk by investing in stocks is also a reasonable choice. Therefore, Grace plans to divide her remaining financial assets in half, investing 50% in five stock funds and 50% in five bond funds, all of which are actively managed public funds that have consistently ranked in the top 20% of their category over the past five years.

In conclusion, a decade is but a blink of an eye, and the personal wealth of the post-80s generation has increased and decreased. As long as the nation's fortune does not wane, everyone's wealth will surely rise with it, although it also depends on individual luck, courage, and wisdom.

For the majority of post-80s individuals whose income exceeds their expenses, investing in the stock market is a good choice. This is because, based on general statistical experience, the long-term return on stocks is significantly better than that of other types of assets. Of course, this does not mean that the returns of other asset categories are necessarily low, but rather that to achieve excess returns, additional effort is required. Investing in other major asset categories may not be suitable for ordinary people. For example, choosing the most competent asset manager is not something that everyone can do; it requires time, money, and expertise.

When it comes to stock investing, if the investment period is long enough to filter out the adverse effects of short-term index declines, then index investing is a worry-free and effort-saving option suitable for the general public. There are many public or private equity funds in the country that can outperform the market, which is related to our investor structure filled with retail investors. If the market evolves, then outperforming the market will become more difficult.In the United States, a study indicates that over 90% of mutual funds cannot outperform the market at any given time (1-10 years). In fact, within the country, when a 5-year period is considered, more than 50% of actively managed equity funds fail to outperform their benchmark.

In 2007, Warren Buffett made a bet with a group of hedge fund managers, wagering $500,000 that a portfolio of actively managed funds they selected would not outperform the S&P 500 index fund he chose over the next decade. By the end of 2016 (during which the subprime mortgage crisis occurred, and the S&P 500 index suffered a maximum drawdown of over 50%, essentially halving in value), the S&P 500 had an annualized return of 7.1%, while the funds selected by the hedge fund managers only yielded 2.2%.

One reason for Buffett's success is that he won the "ovarian lottery," not only being born into a perfect family but also in the United States, one of the most economically vibrant countries. Since his birth, the U.S. has consistently been one of the world's most competitive nations, with long-term economic prosperity leading to stable returns in the stock market. If Buffett had chosen the MSCI Japan Index, the average return over the past decade would have been much less impressive, at only 5.37%.

It must be pointed out in advance that the reason why the long-term returns on stocks are higher than other assets is because the real wealth created by publicly listed companies is continuously increasing (profits do not simply come from a zero-sum game among investors). If one were in a stock market that destroys wealth (where the micro-wealth creation mechanism of listed companies fails), long-term investment in stocks might be a disaster.

Furthermore, is there an optimized strategy for investing in funds? Recently, Jerry has been promoting the method of regular investment in funds to Tom, actually seeking confirmation from his former roommate whether regular investment in funds can bring excess returns. Tom's explanation was convincing to Jerry; regular investment, if broken down into independent investments and viewed over the same period, would not stand out. It is merely a passive investment method without timing and does not bring significant excess returns. If one wants excess returns, they should try to incorporate contrarian investment strategies, such as increasing the intensity of regular investment when the index's PB is below a certain historical percentile.

Of course, there are many investment options. Because everyone's income and expenses have structural differences over time, those with short-term expenditure pressures should not invest in the stock market but should purchase fixed-income products with matching terms. Additionally, each person's psychological energy is different, and risk preferences and actual tolerance levels vary greatly. If one's invested stock portfolio experiences a significant drawdown and causes intense psychological pain, they are also not suitable for betting too much on stock investments and should plan according to their own circumstances.

Therefore, seeking tailored financial advice from professional and trustworthy institutions or individuals may achieve results with half the effort.Related Article Links: Six High-Net-Worth Individuals' Ten-Year Investment Stories

"The views expressed in this article are those of the author and do not necessarily represent the views of the publisher."

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