Most of the assets of Chinese people are in real estate, and many have made money by investing in property, which creates a corresponding illusion that housing prices will keep rising. However, with the differentiation of urban development, the rise and fall of urban housing in the future will not be uniform.

When it comes to the stock market, most people lose money on stock investments, with a general rule of thumb being that seven out of ten investors lose, two break even, and only one makes a profit. The average household assets in the stock market are much lower compared to those in developed countries. The financial market is not well-established, the entry threshold is low, there is a lot of negative news, and the trust in the stock market is relatively low.

Whether it is real estate or stocks, there is a correct logic to follow.

What is the investment logic for real estate?

Real estate is about buying a city, its location, and its amenities. Over the past 20 years, housing prices in China have increased tenfold, and this increase has been widespread. In major cities, the increase may have been more than ten times. If you bought a house 10 years ago, it would have appreciated even if you closed your eyes, and if you bought a house 20 years ago, you would basically have achieved financial freedom. Why were the returns on buying a house during that period so high?

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This is because China's urbanization process has essentially taken place over these 20 years, and during the urbanization process, housing is the most basic tool for appreciation.

Now, the housing prices in large and medium-sized cities will still be in a slow bull market, but they will not soar dramatically. This is because China's urbanization process is not yet complete, the economy of first and second-tier cities is still developing, and the inflation rate is maintained at a certain level, so housing will still have a certain rate of increase each year.

For those small and medium-sized cities with population outflows, there is not much room for investment other than for personal residence, because without population and economic support, houses are just steel and cement. What is valuable is not the steel and cement itself, but the supporting resources of the city.

In the future, it is highly likely that housing prices will double in 10 years, or they may not increase much for many years, and then there will be a surge in the market.Regardless of the trend, those who invest in real estate should understand that, compared to leveraged home buying a decade ago, speculating in real estate is no longer the correct economic behavior.

What is the investment logic of the stock market?

Why do most people lose money in the stock market? It's because most people want to make money from market fluctuations.

However, the true logic of making money in the stock market is to earn from the growth of enterprises.

That is, value investing.

Because stocks are supported by economic development, they are not a zero-sum game. But those who are good at mathematics or who study signal processing will understand that if you subtract the long-term returns, it is still a zero-sum game.

Long-term investment yields a portion of the long-term returns, while allowing the risk fluctuations to offset each other. Gamblers see short-term fluctuations and ignore long-term returns. Even in the U.S. stock market, the fluctuation range is about 2.5 times the returns, and in the Chinese stock market, it is 6 times the returns.

It is quite evident that most people only see fluctuations and fail to see growth.

Fluctuations themselves are a zero-sum game; the more you play, the more money you give to the casino. The various fees for buying and selling a stock exceed 0.1%. Don't look down on this amount; if you keep playing the game of buying yesterday and selling today, more than 10% of your money goes to the fees in a year, which is no different from going to a casino.

All those in the securities industry want you to trade frequently because whether you make money or lose money, they make money.How to Invest in Real Estate and Stocks Correctly

The logic behind holding real estate is to hedge against inflation. If you want to get rich through real estate, the probability is already quite low. The investment logic for ordinary people is to make the lowest down payment possible, borrow as much as they can from the bank, and let their assets grow with the economy to avoid being plundered. To achieve this, they would need an average annual increase of about 6%. Such investment targets can only be found in first- and second-tier cities.

Houses in first-tier cities are more stable, but no one knows in which year the housing market will soar. Therefore, we can buy and hold during periods of stable housing prices, waiting for the slow bull market in real estate. It is relatively easy to see a tenfold increase in ten years. When the house price doubles, in fact, after excluding your own principal, the appreciation part is the invisible inflation.

Most people are not suitable for investing in stocks, especially individual stocks, which carry great risk. However, the stock market is also the most obvious place for wealth growth. So, how can ordinary people hold stocks?

A broad-based industry index plus a large-cap index is a more reasonable holding strategy. Do not invest in what you do not understand. After in-depth research on industries and individual stocks you understand, you can buy them, but do not invest too much in individual stocks. Indexes invest in the fortune of a country, based on the growth of the national economy. Stocks may fall a lot and not come back up, but indexes that have fallen generally rise back.

What indexes can achieve is an annualized return of 7% to 8%. The value of compound interest is infinite.

The power of compound interest first requires a large enough principal investment. If you have 100,000 to invest and it increases tenfold, you only have 1,000,000, which will not greatly change an ordinary person's life. However, if you have 1,000,000 and it increases tenfold, you get 10,000,000, which is enough to slightly improve your life.

The logic of investment is to become wealthy slowly, without the ups and downs of assets causing major fluctuations in your life.