Recently, I encountered a well-known fixed-income fund manager who has achieved impressive performance in both bull and bear markets. When asked about his insights, he said: "Defense is the best offense." As long as you maintain a good defense during a downturn, even if you only achieve average returns during an upturn, your total returns will be significantly better than the market.

The same principle applies to financial management. The first thing to consider should not be how to make money, but how to avoid losing money or minimize losses.

Before the Taiwan stock market bubble, there was a financial executive's driver who used his decades of savings to buy a small piece of land. He held onto it until the land value increased, and then retired with a fortune of a million, just after turning 50. In 1989, as the Taiwan stock market entered a state of frenzy, he, like the vast majority of society, started to trade stocks. A year later, he knocked on his boss's door again, telling him that he had lost all his fortune and hoped to work as a driver for him again.

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The most terrible loss in investment is not the money itself, but life and opportunity. Life is short, and I think for that old driver, it would be difficult to have a second chance to become a millionaire in his lifetime.

As long as there are price fluctuations in the world, there will always be opportunities to make money. The most critical thing is to avoid significant failures.

Napoleon said: "The most important thing is always the last battle." As one of the most outstanding military figures in history, despite having dozens of brilliant masterpieces such as the Battle of Toulon, the Italian Campaign, and the Battle of Austerlitz, the most important one for him must be the Battle of Waterloo, because he never had the chance to display his talents again. One of the reasons why Ji Xianlin and Bing Xin are literary masters, apart from their moral and artistic excellence, is their longevity, because they have more time to accumulate experience and create.

Today's China may be the period with the most opportunities for ordinary individuals in nearly a thousand years. There is no need for everyone to rush to achieve success at a young age; sometimes being a "long-lived" person may have more opportunities.

Investment sometimes requires learning from crocodiles, understanding how to use ambush to wait for opportunities. As long as you do not plan to keep cash for five years, sometimes stopping for 3 to 6 months and waiting to see the situation more clearly is not necessarily a bad thing.What kind of mindset can prevent or minimize financial losses?

1. Never believe in a free lunch

Always be skeptical of easy profits that come knocking on your door. During the 2006 World Cup, there were underground betting activities where some people found a bookmaker with incredibly accurate information, almost always winning bets placed with him. On the day of the final match, many invested their largest sum of money with this bookmaker, only to lose everything. It was later revealed that from the first round, the bookmaker would call a large sample of football fans, telling half that Team A would win and the other half that Team B would win. If Team A won, in the next round, he would only continue to call the half that had predicted correctly. By repeating this process, although the number of fans left was small, they had gone from initial skepticism to firm belief.

Before the Madoff scandal was exposed, Madoff's investors received a steady return of 1% to 2% per month. A stable annual return of 12% to 24% in the United States was nothing short of a fairy tale, yet many investors fell into the trap due to their belief in private spaces and celebrity titles. Such "Ponzi schemes" are tried and tested; once you have money, it's crucial to avoid falling into similar traps. Never get close to miraculous money-making schemes.

2. Only invest in what you understand

I know a vice president of a chamber of commerce who has always been in finance. Four years ago, she mentioned to me that she was considering investing in a mine with high profits. When I asked her about it last year, she said she ultimately decided not to invest because it involved local government relations, mining safety, market sales, and many other issues, the depth of which she was unsure. She chose to give up. Her attitude is worth emulating; sometimes you must be able to resist temptation. "Understanding and familiarity" are good ways to control risks when making large investments.

3. Have ample information and time for contemplation

The same applies to stock market investments. A fund manager friend, after conducting extensive research, was still unable to determine whether a pharmaceutical company was worth investing in. In the end, he had no choice but to visit the pharmacy at the entrance of his community for several months, regularly checking the serial numbers on the company's drug packaging boxes to ascertain the sales velocity. Although the price had risen by 20% to 30% by the time he decided to buy, these investigations gave him much peace of mind when holding the stock.

Before Madoff's scheme was uncovered, he deliberately created a private space and set special rules for the game. If an investor asked too many questions, Madoff would invite him to leave the game. Wealthy individuals, often concerned about their image, were reluctant to be expelled. Through these tactics, Madoff successfully prevented many people from discovering the truth.

The process of "understanding first, then investing" might cause one to miss out on some opportunities to buy at a low price, but it minimizes the chances of making mistakes.4. Go with your gut or give up

However, no matter how much research and contemplation you do, there will still be many moments when you can't make up your mind, because in the end, you may find that factors on both sides are influencing you. If you are an experienced person, you can choose to go with your gut.

But if you feel that you lack experience and find it hard to make a judgment, and if you are just finding it difficult to resist the potential temptation, giving up is also a viable option.

Investing is like surfing; missing one wave always leaves the next, and what's important is not to be swept away by any single wave.