Personality Determines Returns

Recently, I read some comments from friends, which resonated with me.

One friend from China said: The returns on investing in US stock funds are affected by the USD exchange rate. If in the future the USD to RMB exchange rate drops to 1:3, 1:2, or even 1:1, then my annualized investment return wouldn't be around 10%, but would drop to 8% or even below 7%.

The fact is, over the past few decades, the fluctuation range of the USD exchange rate has been between 6.1 and 8.0; the difference between the high and low points is about 30%. If the USD exchange rate drops from 7 in 2025 to 3, that’s more than 50% fluctuation. Could this happen? Possibly, but the likelihood is extremely low.

I asked back: Why not hope for the best? If the USD exchange rate rises to 10 or 20, then your annualized return wouldn't be 10%, but 15% or even 20%.

Another friend asked: If I just invested today and tomorrow encounter a stock market crash like the Great Depression of 1929, wouldn’t that be disastrous?

I also asked him: If you invest today and the stock market continues to rise, just like the over 80% increase in US stocks over the past three years, wouldn’t you make a killing?

The fact is: Over the past 90 years, the largest correction in the US stock market index has been about 57%. Even if your investment encounters a 50% market decline, then the new funds you invest after the decline would be buying at recent lows, right?

More importantly, most people's investment capital comes from their regular savings. If they buy once a month or once every half month, the total number of investments in a lifetime often reaches hundreds or even thousands. Therefore, the premium, stock prices, P/E ratios, exchange rates, and other factors at each purchase have almost no impact on our final wealth level.

Additionally, these things are beyond our control. Worrying about things we cannot control is not only futile but also extremely unwise.

There are many similar questions, and I won't list them all here.

The common trait among these friends is: besides not analyzing historical data, they are overly pessimistic, always imagining the worst-case scenario, then feeling anxious and indecisive.

It goes without saying that any investment involves risks. If we avoid investing because US stocks are risky, then we must face the risk of asset depreciation caused by currency devaluation, which is a certainty to happen. In other words, not investing also carries significant risks!

I am a very optimistic person. I firmly believe in the bright future of US stocks and am willing to bear the risks of the stock market. That’s why I dare to hold full positions in US stock index funds and heavily invest in technology sector index funds. This is also one of the most important factors behind my investment success.

Historically, the most successful investors and entrepreneurs are optimists. This is an undeniable truth.

Moreover, the safest and most secure investment products tend to have the lowest returns. This is a fundamental rule of capital markets.

Therefore, I often say: Pessimists are almost impossible to succeed in investing.

Personality determines returns, and the principle lies here.