Core Viewpoint - The article discusses the three phases of a bull market as outlined by Howard Marks, emphasizing that the final phase is particularly dangerous for investors due to the illusion of perpetual growth and the accumulation of risks [4][10]. Group 1: Phases of Bull Market - **First Phase**: Characterized by hesitation and skepticism, this phase begins quietly after a bear market. Investor confidence is low, and while the market shows signs of recovery, most retail investors remain cautious. In Q1 2019, the CSI 300 index rose nearly 30%, yet over 60% of retail investors were too fearful to participate [5][7]. - **Second Phase**: Marked by confirmation amidst divergence and volatility, this phase sees improving fundamentals and initial signs of profit. The market sentiment shifts from hesitation to optimism, but caution remains as investors experience multiple corrections. A typical example is the market behavior starting in July 2020, where the Shanghai Composite Index broke through 3000 points [6][7]. - **Third Phase**: This phase is characterized by euphoria and excitement, where valuations reach historical highs and any negative news is seen as a buying opportunity. Investors often enter the market without sufficient knowledge, leading to irrational behavior. Notable instances include the 2015 bull market peak when the ChiNext index had a P/E ratio exceeding 100 [8][9]. Group 2: Risks and Strategies - **Risks in Third Phase**: The article highlights that the third phase is particularly perilous due to the interplay of human psychology and market dynamics. Investors often become overly optimistic, leading to increased leverage and exposure to significant losses when the market turns [10][11]. - **Investment Strategies**: To mitigate risks, the article suggests that experienced investors should focus on strategic entry during the first phase, consider adding positions during the second phase's corrections, and exit decisively during the third phase. Maintaining rationality during euphoric market conditions is crucial to avoid significant losses [11][12]. - **Specific Strategies**: Recommendations include establishing a stock-bond rebalancing mechanism, employing a pyramid-style position management approach, and setting target return thresholds for profit-taking [12][13].

Group 1 - The essence of excess returns comes from contrarian actions, as the S&P 500 index is currently at a forward P/E ratio of 22, which is above the historical average of 16 but below the extreme of 32 seen in 2000 [1] - Howard Marks emphasizes the importance of staying in the market rather than trying to time it perfectly, suggesting that investors should reduce holdings when valuations are high but should be ready to buy back when prices are low [1][2] - Emotional stability is crucial for contrarian investing, where investors must assess market sentiment to determine whether they are in a high-risk or low-risk environment [3] Group 2 - The core of holding periods should be based on logic rather than a fixed timeframe, advocating for a disciplined approach to resist impulsive actions during market fluctuations [4] - Marks highlights that true long-term investing is about patience and allowing compounding to work, rather than simply holding onto investments without regard for market conditions [4][5] - The "three stages of a bull market" illustrate market cycles, where the first stage presents buying opportunities, while the third stage is often characterized by excessive optimism and high risk [6] Group 3 - The paradox of risk and return is discussed, where high returns are not guaranteed by high risk, and investors must find a balance between low certainty and high uncertainty [7] - True excess returns are found in overlooked opportunities, where investors must seek out undervalued assets rather than following mainstream consensus [8] - The essence of investing is a test of self-discipline against human emotions, requiring investors to maintain rational judgment amidst uncertainty [9][10]