A Systematic Framework for Individual Investors to Build Underlying Investment Logic in the A-Share Market

Based on the provided investment philosophy article, I will systematically analyze how to build an investment logic framework that generates long-term excess returns in the A-share market.

• Diligently learn investment knowledge
  : Establish a solid theoretical foundation, including mainstream schools like value investment, growth investment, and quantitative investment
• Understand yourself and overcome human weaknesses
  : Cognitive biases (confirmation bias, anchoring effect, loss aversion) are the main causes of investment failure
• Learn humbly and break narcissism
  : Stay modest, acknowledge cognitive boundaries, and avoid overconfidence
• Mindset is more important than ability
  : Emotional stability is the prerequisite for long-term profitability

• Independent reverse thinking
  : Be greedy when the market panics, and panic when the market is greedy
• Correlation over causation thinking
  : Focus on factor correlations rather than overpursuing causal relationships behind data
• Dialectical thinking
  : Understand unity of opposites, such as balancing high valuation and high growth
• Cycle thinking
  : Identify and utilize market cycles, industry cycles, and sentiment cycles
• Irrational behavior cognition
  : Understand the irrational characteristics of market participant groups

• Guided by statistics and probability theory
  : Make decisions based on probability and pursue positive expected value
• Strategic thinking
  : Systematic thinking from macro to micro
• Focus on important matters
  : 80/20 rule, concentrate on core investment opportunities
• Gain family support
  : Build a stable investment environment

The article specifically mentions the profound impact of the Kuznets Cycle (15-25 year real estate/economic cycle) on the A-share market:

• Identify cycle position
  : Which stage of the inventory cycle are we currently in?
• Avoid cycle traps
  : Do not be overly optimistic at the top of the cycle or overly pessimistic at the bottom
• Cross-cycle layout
  : Utilize the hedging characteristics of different industries and assets

Core Principle: Don’t invest in what you don’t understand; continuously expand boundaries

Action List:
[ ] Build 3-5 deeply researched industries (via reading prospectuses, annual reports, industry research reports)
[ ] Sort out 3-5 core companies for each industry and build financial models
[ ] Regularly review investment decisions and record the boundaries of "what you know" and "what you don’t know"
[ ] Use the Feynman Learning Method to test understanding depth (can you explain clearly to others)

Core Principle: Price below value is the premise of buying

Quantitative Standards:
- Valuation indicators like P/E and P/B are below the 30% historical quantile
- DCF valuation discount rate ≥30%
- Diversified investment (single stock ≤10%, single industry ≤30%)
- Keep cash reserves (20% in bull markets, 40% in bear markets)

Core Principle: Persist in positive expected value decisions long-term

Decision Framework:
1. Evaluate before each investment: Win rate × Odds = Expected Value
2. Require expected value ≥1.5 (when win rate is 50%, odds need to be ≥1:3)
3. Record probability assessments for each decision and verify accuracy afterward
4. Establish an investment journal to analyze reasons for misjudgment (cognitive bias vs. insufficient information)

Core Principle: Identify cycle positions and lay out reversely

Cycle Signal Monitoring:
[ ] Market sentiment indicators (new account openings, margin financing balance, turnover rate)
[ ] Valuation quantiles (market-wide PE/PB quantiles)
[ ] Macro liquidity (M1/M2 scissors gap, social financing growth rate)
[ ] Policy signals (regulatory attitude, industrial policy direction)

Core Principle: Investment systems need dynamic optimization

Evolution Mechanism:
1. In-depth quarterly review (return attribution, decision quality analysis)
2. Annual system upgrade (introduce new tools, eliminate ineffective methods)
3. Maintain cross-disciplinary learning (psychology, sociology, history)
4. Build an investment circle (communicate with rational investors)

• Learning List
  :
  • Classic investment books (