2025 has already passed, and many people are starting to review their annual returns. My situation is that large accounts are close to 25%, small accounts exceed 40%, and combined, the average is 30%. In this bull market, I am still lagging behind various stock gods, but on the other hand, I remain optimistic—if we include those leveraged lithium carbonate futures and silver futures that hit the mark, the returns are actually quite good. However, these are not closely related to stock investments, so I simply did not include them in the final statistics.

Actually, over the past ten years, I have been using the same investment system. There are two key words: buy when undervalued, sell when overvalued. Strictly adhering to this principle, my annualized returns have stabilized around 20%, and I have not experienced a single year of loss. The most difficult year was 2018, when I hit a big winning ticket; without that luck, the year would have ended with a slight loss. Thanks to that risky experience, looking back, 2018 has become the most valuable textbook.

So what exactly is this system? I call it the Market Earnings Rate, and the formula is very simple: Market Earnings Rate equals the Price-to-Earnings Ratio divided by Return on Equity (using PE divided by ROE, then divided by 100). This concept was inspired by Warren Buffett.

In the 1980s, Buffett made two large-scale purchases of Coca-Cola. Interestingly, when calculating the average of those two years, the Market Earnings Rate was exactly 0.4 times. Coincidentally, since then, the phrase "buying assets at 40% of their value" has become Buffett’s classic expression. He bought stocks at 40%, 50%, 60% of their value, and I follow the same logic, also using 40%, 50%, 60% to allocate.

It should be noted that the dividend tax rate for long-term holdings in A-shares is 0%, so a 1x Market Earnings Rate is considered overvalued. But the situation is different for H-shares, where the long-term dividend tax is 20% or 28%, meaning the corresponding Market Earnings Rate should be 0.8 times or lower. These details may sound very technical, but in practice, they determine your profit ceiling.

Returning to the 2025 performance report, I think it’s worth sharing with everyone. Not to show off how impressive the returns are, but to clarify: as long as the direction is correct, the system is clear, and execution is strong, you can find ways to make money in any market environment. Those days with 20% annualized returns may not be as exciting as stories of overnight wealth, but they are stable and repeatable. Practicing this philosophy consistently for ten years, the accumulated returns are quite substantial.

Next, I plan to dedicate more space to deeply analyze the investment decisions of 2018. That year taught me a lot and is the key to understanding why this investment system can be effective in the long term. For readers interested in that period, be sure to read the detailed follow-up review carefully.