Bad market times call for disciplined investing

Several weeks ago, when the Chinese stock market rally was at its peak, everybody was probably laughing at me.

I had cashed out all my holdings, and narrowly missed the raging bull run.

But now they are envious, because I belong to a small group of retail investors who can sleep and eat well after the market's precipitous declines.

I am no investment guru. I am just one of those small players who try to earn a little additional income from stock trading. But what ultimately made us all a winner or a loser was, first and foremost, whether we were disciplined investors.

I had seen crazier times when stock prices only went up, even for tech startups with no solid revenues, when I worked for one such company during the Internet bubble of 1998 to 2000.

That market crash dealt a major blow to my career and personal finances, but it had taught me discipline for my future investment in stocks.

I usually buy in a bear market and follow traditional metrics like price to earnings ratios and a company's ability to pay dividends, which reduces my risk of picking stocks that could fall below their purchase price.

But in the tumultuous, emotionally charged Chinese stock market, the real challenge is to overcome greed and stay cool amid a herd mania.

Hence my rule for the endgame: I sell when I have made a profit of about 20 percent.

Of course, investment is a personal matter and other wiser and more lucrative ways do exist.

But my point is that self-discipline is a must－particularly after we witnessed the irrational investor behavior and speculation that ran amok in recent weeks, which eventually led to a stampede that wiped out huge chunks of investor wealth.

Most individual investors did not have a coherent and prudent investment plan when they entered the market.

Retirees hoped to earn some "grocery money" and office workers wanted to make a quick buck to supplement their living costs.

Driven by greed and fear of missing out, some bought stocks by borrowing money at expensive rates.

When picking their stocks, many relied on recommendations from investment advisers, or insider information that could have been leaked by companies to talk up their share prices.

Warnings about risks associated with any investment as well as possible market corrections were generally ignored.

Many regarded discipline as superfluous, allowing their decisions to be skewed by sentiment.

Before novices open a stock account, they are asked to answer questions about their risk tolerance, to help them know if they are "conservative", "moderate" or "aggressive" investors.

But many tick the multiple choices perfunctorily, with some embellishing their personal data and personality traits to make sure their applications are not rejected.

Some even ask financial advisers to complete the questions on their behalf.

Amid the frenzy, there had emerged several success stories of small investors who did do their homework and had worked their portfolio according to a disciplined plan.

In one widely reported story, Liu Junling, a Beijing massage therapist, made 130,000 yuan ($21,225) in nine months after investing in Bank of Communications Ltd shares.

Liu had focused on the bank believing its business would increase with the government's Belt and Road Initiative, and stuck to the principle of "buy low and sell high" during market fluctuations.

The lessons of such success, however, seemed to have been lost on the madding crowd.

Instead, the experiences of newly minted millionaires like the blind masseur simply fueled the exuberance of others, who thought anybody could make a profit from stocks.

Whether disgruntled investors become savvier after their recent losses remains to be seen.

I only hope they do not take for granted that they will always be taken care of by the government, despite their own follies and undisciplined behavior.