Chapter 11: Clearing the Clouds to See the Sun

Two days later, Long Wuyang called: “Uncle, I’ve already opened an account on your Changfeng Securities’ High Achiever app. I want to try investing in stocks. What do you think I should buy?”

Old Jia was a bit puzzled and asked, “Where did you get the money to invest in stocks?”

Long Wuyang replied sheepishly, “I work for my mentor, and he pays us a small salary every month. As for my daily expenses, I ask my mom, so this part-time money is my own little nest egg. I just want it to grow and make some extra money.”

Old Jia asked again, “Is there any chance you might suddenly need to use this money you earned from working?”

Long Wuyang confidently said, “If I urgently need money, I’ll just ask my mom and get a bit from her.”

Old Jia chuckled, “You’re still so young and haven’t quite grown up yet—always scheming on your parents. Alright, I’ll tell you what to do. First, is the money your mentor pays you every month fixed?”

Long Wuyang answered, “Not exactly. Sometimes the teacher forgets when he’s busy, but he quickly makes up for any delays.”

Old Jia said, “Okay then, let’s assume your mentor pays you 2,000 yuan each month. If you want to save this money, there’s a pretty lazy way to do it: you can set up a regular investment in a fund. This will save you time and won’t affect your research work.”

“Regular investment in a fund?” Long Wuyang mused over the phone. “How does that work? How much can I earn?”

Old Jia replied, “I suggest you pick a fund that tracks the CSI 500 Index and invest 50 yuan daily. Just set up a regular investment plan on your trading app. All you need is to have 2,000 yuan in your linked bank card each month. This way, your average cost for building your position will be the monthly average of the index.”

“CSI 500? I think I’ve heard of it,” Long Wuyang said seriously. “There was something called ETC recently that looked really fierce. Is that the same?”

“No, not ETC. ETC is the electronic toll collection for highways. You mean ETF!” Old Jia corrected him. “ETF stands for Exchange-Traded Fund, which trades like a stock and can be bought or sold anytime. The CSI 500 fund I’m telling you to invest in regularly is not an ETF. The difference is that ETFs have premiums or discounts over their net asset value since they trade freely, while the regular index fund you’ll invest in is priced at net asset value daily. You can think of the net asset value as the actual cost price for that day. So you don’t have to worry about daily ETF price fluctuations, saving you a lot of effort. You can focus on your research.”

“Then why invest in the CSI 500? Aren’t there many other indexes? I heard on Xiaohongshu that the CSI 300 has been performing really well,” Long Wuyang said, still skeptical.

“Let me explain what these indexes represent,” Old Jia patiently explained. “Simply put, you can think of the CSI 300 as representing China’s traditional economy — traditional productive forces and industries. The CSI 500 represents new quality productive forces. The CSI 1000 represents future industries. As for the Shanghai Composite Index, you can think of it as representing the real estate sector. Investing in stocks is investing in the future, so among these indexes, which one do you think might yield the best returns?”

“CSI 500…?” Long Wuyang murmured. “Then why not buy the CSI 1000? Isn’t future industry better?”

Old Jia swallowed hard and continued, “CSI 1000 does represent future industries, but those industries rely on existing technology levels and are a higher-level exploration. High-tech carries high risks. If China’s transition of new and old technological productive forces goes smoothly, then the end point of new quality productive forces represented by CSI 500 will be the starting point for future industries. But social and technological developments are never smooth. So before the new quality productive forces represented by CSI 500 succeed, the future industries represented by CSI 1000 remain unpredictable and volatile. It’s not suitable for ordinary investors—only for institutions and professionals.”

“Ha, now I completely understand. I’m just a little ‘scallion,’ a small investor. Compared to the big sharks in finance, I’d better keep quiet and hope to be spared!” Long Wuyang joked mischievously over the phone, then turned serious. “Actually, our main work is related to investing in the CSI 500. If our generation innovates more, the index might rise more, right, Uncle?”

“That’s right. You can think of it that way,” Old Jia said enthusiastically. “If all the workers and researchers engaged in new quality productive industries in China understood and worked as hard and creatively as you do, how could the CSI 500 index not double?”

“I get it,” Long Wuyang said excitedly. “Then I’ll invest in the CSI 500 regularly and work hard. That’s basically working hard to make money for myself and for my investment.”

Old Jia nodded with satisfaction and said earnestly, “In the grand context of Sino-American rivalry, it’s a life-or-death technology war. The so-called financial war is essentially a technology war. If we win the technology war, the Chinese stock market will be a healthy, steady bull.”

But who’s going to let you raise a steady bull that smoothly? In their eyes, the A-shares market is better off as a wild bull or a sick bull, because since the Sino-US trade war began, the nature of China’s bull market has been fundamentally different from the past.