Upon waking up in the morning, I saw my pet tabby cat playing with a hazelnut on the floor. I knew that soon the hazelnut would be played into the space under the bed, never to be retrieved again. The space under my bed is only two centimeters high, and I estimate there are at least hundreds of hazelnuts in there already.

The vast majority of stock traders are like my cat playing with hazelnuts; sooner or later, they will lose their toys. This is an inevitable outcome. When I was young, I engaged in short-term trading. I found that no matter how high your skill level is, you will eventually buy a stock that encounters a black swan event, which will make you return to square one overnight.

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The reason is similar to the cat; it cannot fully control the direction of the hazelnut's movement on the ground. Sooner or later, the hazelnut will be bumped into the space under the bed and never retrieved. The same is true for stock trading; no one can fully control the trend of the stocks they hold, no matter how smart they are. The stocks we buy will inevitably experience a significant drop at some point.

Going all-in on a single stock or using leverage is ultimately destined to result in losses. This is because black swan events are bound to occur, and we humans cannot predict or control them. Each of us is that cat playing with hazelnuts. The only difference between people is the time it takes for the hazelnut to end up under the bed.

Therefore, after middle age, I refuse to go all-in on a single stock or borrow money to trade stocks, as it is destined to result in losses. I started to focus on investment portfolios, putting eggs in multiple baskets. Some experts will "kindly" tell you: "Retail investors do not have enough energy and time to manage more than two or three stocks."

Imagine the result of a kitten playing with two or three hazelnuts at the same time? In the end, it will still be the same, quickly playing them all into the space under the bed!

The most important reason why the kitten loses its hazelnuts is that there is a bed in the room that is extremely low to the ground! The name of that bed is "risk." If there were no such bed, the kitten would never lose its hazelnuts.

The stock market is just such a room with a low bed, where risks are ubiquitous. For example, global economic risks, policy risks, disaster risks, war risks, operational risks, etc., are all the low beds in the room that may devour our hazelnuts at any time. We cannot stay away or avoid them.

So, it is inevitable and bound to happen that the stocks people hold will experience paper losses in the stock market. If you want to make money in the stock market in the end, you must protect your principal. You must not lose all the hazelnuts in your hands.

It is clear that the simplest and most feasible way is to do asset allocation and investment portfolios, so that you have many hazelnuts in your hands, and you can keep playing. This gives you a lot of opportunities to make money and allows you to take out a portion of the money you earn. In this way, you can keep playing.Also, it is best to stay away from some obvious risks, which means trying to keep a distance from the bed when playing with hazelnuts. This way, you can play for a longer time. For example, stay away from poor-performing stocks, stay away from over-hyped stocks, stay away from stocks in industries that may undergo significant changes, and avoid frequent trading (the more frequent the trading, the more likely you are to encounter a black swan event), and so on.

Yesterday, I read an article that left a deep impression on me. The author said that he suddenly saw his trading records from six years ago and was shocked. He said he was fortunate to have sold them at that time, otherwise, the loss would have been severe if he held them until today. He wanted to say that the risk of long-term stock holding is also great.

What did he hold? It turned out to be mostly real estate stocks and insurance, many of which were star stocks at the time. His case shows that some industries and stocks should not be held for a long time. I quickly checked which industries my positions were in. Fortunately, I have a heavy position in the consumer industry, which is the evergreen tree of the stock market. This industry can be held for at least 100 years!

Here, I would also like to reiterate: the "long-term holding" I usually talk about is conditional long-term holding. For example, the industry prospects are good, the position ratio is very low, there have been no significant changes in policy and fundamentals, etc., all of these are the prerequisites for long-term holding. The risk of stock investment is everywhere, and there is no unconditional long-term holding.