Common misconceptions about the economic outlook and the prospects of the crypto and stock markets among the public

Today, let’s discuss a common misconception about the prospects of the economy and the crypto and stock markets. Many people believe that the economic outlook of a country or industry directly determines investment profitability. However, this view overlooks the importance of economic scale. In fact, a country’s economic size or outlook does not necessarily correlate with investment returns; sometimes, it may even be negatively correlated.

This misconception stems from a widespread belief: economic prosperity inevitably breeds excellent companies, thereby bringing substantial returns to shareholders. But the reality is not always so. Take China’s reform and opening-up over the past three or four decades as an example. During this period, China’s GDP grew by dozens or even hundreds of times, becoming the world’s second-largest economy. People’s living standards and incomes also improved significantly. However, at the same time, the performance of the crypto and stock markets has been relatively flat, and many investors have not achieved the expected gains in the crypto and stock markets.

This phenomenon prompts us to reflect: although China has created an economic miracle, the performance of the crypto and stock markets has not synchronized with it. This indicates that a country’s economic prosperity does not necessarily translate into prosperity in the crypto and stock markets. The essence of the crypto and stock markets is more about raising and allocating funds rather than directly reflecting economic growth.

Further analysis shows that many companies raise funds through the crypto and stock markets for business development and expansion, but the ultimate beneficiaries are often consumers, not investors. For example, companies like Alibaba, through internet platform innovations, provide consumers with higher quality and more convenient services. However, these achievements have not directly translated into investor returns. The prosperity of the crypto and stock markets is more built on the continuous listing of new companies and influx of capital rather than the sustained growth of existing companies.

Moreover, the development of the national economy and industry prospects do not always convert into investor gains. Historically, many industries once considered promising—such as railways, automobiles, and aircraft manufacturing—brought significant societal changes, but many early investors suffered losses due to company bankruptcies. This phenomenon is especially evident in the internet industry; although internet development exceeded expectations, many early investors lost heavily after the bubble burst.

Therefore, when considering investments, investors should not base their decisions solely on the economic outlook of a country or industry. The lessons of history tell us that even in prosperous economic times, investors may face losses. Investors need to recognize that there is no inherent link between a country’s or industry’s economic prospects and individual investment returns. This misconception can lead to poor investment decisions and impact their financial situation.

In summary, when making investment decisions, investors should base their choices on comprehensive analysis and deep market understanding, rather than just optimistic economic forecasts. Only then can they avoid common misconceptions and make wiser investment choices. As individual investors, we should care about why such analyses are made, so that we do not repeat the same mistakes when looking to the future. There is no necessary connection between the country’s economic outlook and the crypto and stock markets. Another question is, beyond national factors, whether industry factors necessarily determine whether your company will profit from investments. This is also a common misconception.

As individual investors, we should understand why such analyses exist, so that we won’t make the same mistakes in future outlooks. There is no inherent link between a country’s economic prospects and the crypto and stock markets. The same applies to industry prospects; many believe that industries like AI have great potential. Some say China’s AI industry could rise 100 or even 200 times, but that does not mean investing in AI will necessarily yield high returns. The gains could be 1x, 100x, or 200x.

I already used the internet as an example earlier. The current difficulty is that you cannot determine which AI company will become a future giant, like Amazon or Alibaba. If you knew, please tell me. Don’t think it’s easy, and don’t guess casually. If you truly believe that, I suggest you look back at American newspapers from over 20 years ago to see how many predicted the future leaders and top companies—many of those giants are no longer around. I’m not saying Hengrui is bad; I just want to tell everyone not to be arrogant, and not to assume that owning current assets guarantees success.

To clarify, whether it’s the country’s economic outlook or industry prospects, there is no fundamental necessary link to each investor’s returns. Companies create social value and drive industry development. The internet has become more complete, but as a shareholder or investor, you might not be able to make money.

So, don’t act impulsively; think carefully. This way, you won’t have mistaken ideas. Buying stocks is like gambling; a good industry doesn’t mean you will profit from investing in that industry. It’s not that simple. If it were so simple, everyone could make money in the crypto and stock markets.

Why do most people lose money in the long run in the crypto and stock markets? Because of some cognitive misconceptions. I want to clarify misconceptions about the country’s economic outlook and industry prospects—these do not necessarily relate to whether investors make money. I hope everyone can have a clear understanding of this, so that they won’t go astray in the big picture.