Ren Zeping: Nine Recommendations for Stock Investors

Ask AI · Ren Zeping’s Confidence Bull Logic: What Challenges Does It Currently Face?

Text by Ren Zeping Team

Since September 24, 2024, unprecedented macro policies and the AI revolution have ignited the “Confidence Bull” market. In early 2026, the market repeatedly hit new highs, with strong consensus on a bull market, even leading to short squeeze phenomena. Recently, with the escalation of US-Iran conflicts, the market has experienced volatility.

Bottoms rely on faith; tops rely on rationality. The stock market always rebirths from despair, rises amid controversy, and crashes in celebration. Is the logic of the bull market still valid? If the logic breaks down, the bull market ends. So, what signals indicate whether the bull continues or concludes?

Based on my analytical framework, market differentiation and volatility will intensify, and wrong directions will not be profitable.

As one of the earliest whistleblowers and flag bearers of this bull market, I proposed the “Confidence Bull” in September 2024. The logic is a superposition of policy-driven, technology-driven, and liquidity-driven factors. This is a successful macro-level prediction of a bull market, following the 2014 “5000 points is not a dream.”

With twenty years of macroeconomic research and investment practice, clarity of trend is crucial. Vague correctness beats precise error. Maintain a calm mind, think about the essence, keep it simple, and look at the long term.

Markets rise and fall; investing has规律性 (regularity) and魅力 (charm), but also残酷性 (cruelty). Be fully aware of this, maintain a good mindset, and do not let market fluctuations affect your normal life and work.

Investing is a process of cultivating character and enhancing cognition. Respect the market, revere the market, and keep learning to enjoy the investment journey.

We have summarized nine major suggestions to help investors.

1. Rationally view market fluctuations; respect market规律; avoid being led by emotions

Markets go up and down; volatility is normal. Warren Buffett famously proposed the “Mr. Market” theory. “Mr. Market” quotes a daily market price, which may be above or below the intrinsic value of stocks. Short-term fluctuations are normal, but in the long run, stock prices will return to intrinsic value. Bear markets often have oscillations, and bull markets may have larger fluctuations. No one can predict very short-term market movements accurately.

How to cope with market ups and downs?

Stay rational and calm. Markets are full of uncertainties. Don’t let emotions drive your decisions. Human greed and fear are amplified in the market, leading to mistakes—selling in panic or adding positions in euphoria, repeatedly trading without strategy, often with poor results.

The key is to judge the direction, focus on finding good companies, and wait for the right timing. Rising prices carry risks; declines present opportunities. True investors become more cautious as prices rise and more optimistic as prices fall. Buying cheap is the hard truth. Buffett said, “Be greedy when others are fearful; be fearful when others are greedy.”

2. Use idle funds for investment; avoid gambler mentality; don’t blindly leverage

In stock investing, using idle funds is essential, ensuring it doesn’t affect short-term living standards, and maintaining composure, dignity, and patience. Some investors, seeing a bull market, want to invest all their family assets or even borrow money to buy stocks. This gambler mentality, hoping a bull market will make them wealthy, harms health, distracts from work, and can ruin sleep and life quality. They become anxious, and if urgent expenses arise when the market is low, they may be forced to sell at a loss.

What is idle money? According to the Standard & Poor’s family asset quadrant, household assets can be divided into four parts: money for daily expenses, emergency funds, wealth growth funds, and capital preservation and appreciation funds. Keep 3-6 months of emergency cash for daily expenses; allocate funds for wealth preservation to combat inflation via stable products; use some for high returns; and set aside insurance for risk hedging. Adjust proportions based on personal risk tolerance, but always keep enough cash for living needs.

3. Bull markets don’t guarantee profits; avoid chasing highs, panic selling, frequent trading, and constant tinkering

Graham, Buffett’s teacher, famously said, “Bull markets are the main reason why ordinary investors lose money.” Bull markets can create illusions of being a stock god, leading to aggressive trading, chasing highs, and panic selling. But most investors, despite aggressive moves, rely on luck for gains and losses. They often judge performance based on short-term performance, which is risky without comprehensive analysis. Market hot spots change rapidly, making precise timing difficult and risking overtrading, which incurs high transaction costs.

How to handle market volatility?

Stay rational. Markets are unpredictable. Don’t follow the crowd blindly during rallies or panic during corrections. Look at policy and fundamentals for signs of change.

The real skill is to identify good companies and wait patiently for opportunities. Rising prices mean risk; falling prices mean opportunity. Good companies should be approached with caution when prices rise and with optimism when prices fall. Buying at low prices is the hard truth. Buffett said, “Be greedy when others are fearful; be fearful when others are greedy.”

4. Change cognition; value knowledge; avoid listening to rumors

Start with changing your mindset. New investors often don’t understand what to invest in and blindly believe so-called “insider information,” buying stocks without understanding the company’s business or trading rules like T+1. They think they can win by luck. If they lose, they blame others. But, as the saying goes, you can’t earn money beyond your understanding. Even if you get lucky once, it will eventually catch up with you.

The stock market reflects economic fundamentals, policies, capital, and sentiment. Classic analysis shows that stock value is the discounted future cash flow, influenced by corporate earnings (macro and company fundamentals), risk-free rates, and risk premiums, affected by monetary policy and market sentiment. Continuous updating of understanding is necessary to keep pace with the market.

Systematically learn basic stock market knowledge, financial analysis, valuation principles, and develop your own analysis framework. Avoid blind speculation; treat investing seriously, as real money is involved.

5. Know your limits; choose investment methods within your能力圈 (competence circle)

Even master investors only earn within their能力圈. Buffett, a value investing master, proves that the efficient market hypothesis is flawed. Markets are full of irrationality, animal spirits, and hormones, but Buffett is not an expert in macro hedging. Soros and Dalio are macro hedge specialists; Soros’s 1992 attack on the pound and 1997 shorting of the Thai baht are classic examples of macro understanding and bold action.

If you have time and energy, you can make your own decisions. Experienced investors can directly buy and sell stocks or use ETFs to participate in sectors or themes with opportunities.

If you lack time or expertise, it’s better to rely on professional institutions. Use mutual funds or private equity products, selecting managers with strong long-term performance, controlled drawdowns, and excellent bull market returns.

6. Diversify investments; don’t put all eggs in one basket

“Don’t put all your eggs in one basket” aims to reduce非系统性风险 (unsystematic risk). Holding multiple unrelated or negatively correlated assets can effectively lower overall portfolio volatility without significantly reducing expected returns.

For ordinary investors, reasonable asset allocation across different asset classes and sectors helps balance risk. Incorporate low-correlation assets like gold, bonds, and commodities for hedging. In stocks, cyclical sectors are sensitive to macro changes, while defensive sectors like consumer staples tend to be less volatile.

7. Maintain a long-term perspective; avoid changing beliefs over three lines

Over-reliance on short-term market sentiment is unwise. During rapid rises, don’t follow the crowd blindly; during corrections, don’t panic sell. Instead, assess whether policy, fundamentals, or other factors have fundamentally changed.

Investing is a long-term endeavor. Don’t be swayed by short-term fluctuations. Resist the temptation to chase highs or sell in panic. Focus on companies with long-term growth potential at reasonable prices. Long-term holding of quality companies often yields better returns.

8. Avoid disposition effect; don’t let emotions drive decisions; practice rational stop-loss and steady gains

Disposition effect refers to investors selling winners too early and holding losers too long—“selling too soon when profitable, and holding on to losses.” It stems from loss aversion, where short-term market swings influence decisions, leading to avoiding realizing losses and prematurely taking profits.

To counteract this, focus on analyzing company fundamentals, financial statements, management, macroeconomic trends, and policies, rather than reacting impulsively to short-term volatility.

9. Avoid “selective attention” bias; evaluate markets and companies comprehensively and objectively

Selective attention means focusing only on information that supports one’s views while ignoring contrary data, leading to biased perceptions and poor investment choices. For example, some investors complain, “I buy this stock, and it always falls; I sell, and it always rises.” But markets don’t move because of individual will; this illusion arises from selective attention, ignoring other factors.

To overcome this, maintain diverse information sources, develop comprehensive data analysis skills, and base decisions on macroeconomic, industry, policy, capital flow, and company performance data. Build your own investment framework.

Finally, investing is a long-term cultivation of knowledge and character. Respect the market, learn from it, and learn from investment masters. Humility leads to success; arrogance often leads to failure. Wishing everyone steady progress and continuous growth on their investment journey.