This post distills key ideas and investment principles from Jeongsu Han’s Principles of Investment that Change Your Life, along with my own interpretation and perspective. This approach may not be for everyone.

I. Prologue

The Big Short, a film about the 2008 financial crisis, opens with these words. “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

There is a big difference between thinking you know the future and actually knowing it. The more certain you are that you have found the right answer, the greater the price you pay when that answer turns out to be wrong.

We are surrounded by advice that sounds like the answer to investing. “Stocks are better than real estate. Invest in emerging markets instead of the U.S. Now is the time to hold on to cash. You absolutely have to buy.” The stream of tempting advice never ends. When someone you know makes money in stocks, stocks seem like the answer. When a friend multiplies their money in crypto, crypto seems like the answer. The problem is that these plausible answers contradict one another.

Tolstoy’s Anna Karenina begins like this. “All happy families are alike; each unhappy family is unhappy in its own way.”

In investing, though, people succeed in different ways. Some make money in growth stocks; others in dividend stocks, real estate, or Bitcoin. Some experts tell you to buy stocks now, while others insist that this is absolutely not the time. When Warren Buffett says you should diversify, you nod along. But when someone says Buffett actually built his wealth through concentrated investing, that sounds right too.

None of these people is necessarily wrong. There are real examples of people making money in their own circumstances, in their own times, and in their own ways. So how do we identify the right answer among all these candidates? I think the question itself is wrong. It is not enough to question things that look like the right answer. We need to question the very idea that we can find the answer to investing in someone else’s words.

The right answer in investing varies by era, circumstance, and person. Real estate was a disaster in Japan in the 1990s, but a blessing in Korea during the same period. If you had bought Apple shares in the 2010s and held them until today, you would have become enormously wealthy. But applying the same strategy now might not produce satisfying results.

Buffett’s principles have been tested over decades, but the era when he began investing was different from today. The scale of the assets he manages is also different from that of an individual investor. Even if he is the world’s best investor, there is no guarantee that copying his approach is the best choice for me.

That makes it hard to prescribe an investment approach that works for everyone. Yesterday’s right answer can become tomorrow’s wrong one. Paradoxically, acknowledging that there is no single right answer in investing is the starting point closest to one.

II. The investment principles shared by people who changed the world

I decided to study and emulate the people who had made the most money through investing. I started with the list of the world’s richest people. Of the top 10, Warren Buffett was the only one who had become wealthy solely through investing. Most of the others were entrepreneurs like Meta’s Mark Zuckerberg and Amazon’s Jeff Bezos, who had built companies that grew thousands or tens of thousands of times over.

That gave me an important clue. “The people who became the richest in the world were founders who staked their lives on companies driving change!” I thought that if I could follow their approach as an investor, I could improve my chances of becoming wealthy. So I began turning that sentence into an investment strategy.

Split it in two, and you get “companies driving change in the world” and “founders who staked their lives on those companies.” Two principles follow.

  • First, get on board with the forces changing the world.
  • Second, maximize your exposure to those forces (in other words, bet big).

To earn returns that change your life, you have to invest heavily in good opportunities. And the changes that produce large returns need time to become reality. The founders who became billionaires were, in effect, both long-term investors who got in early and stayed, and concentrated investors who staked their lives on that change.

Founders have to create change themselves. Investors only need to recognize the people who will lead it and the companies that will benefit. We can participate in the same shift without the burden of running a company ourselves. Investors do not have to stake their entire lives on it the way founders do, either. If your conviction is strong, invest heavily. If you are uneasy, invest only as much as your conviction allows.

If you stake everything, getting one major shift right can make you rich. But the more you diversify, the more things you have to get right at the same time. In that sense, Warren Buffett is clearly an extraordinary investor: he made it onto the list of the world’s richest people without going all in on a single company. Today, few companies are worth more than the money he has, so he has little choice but to spread his investments across many businesses. But Buffett, too, built much of his wealth by concentrating on three to five companies.

Buffett put it this way. “Diversification is protection against ignorance. It makes little sense if you know what you are doing.” Simply put, diversification is a hedge against ignorance, used when you lack conviction.

Warren Buffett’s Berkshire Hathaway has earned 70% of its total returns since 2016 from Apple. Before that, it also grew its wealth by concentrating its investments in, or outright acquiring, a small number of companies such as GEICO, Coca-Cola, and American Express.

The path I found here is clear. Spot change early, find the companies that will lead it, study them until I know them like an expert, then concentrate my investments and hold them for a long time. Put simply: “Pick one well, then sit tight.” That simple sentence became the foundation of the investment principles I have followed ever since. (Once I learned that no one on the list of the world’s richest people had become wealthy through short-term investing, I stopped hopping from stock to stock, buying and selling.)

On the journey to building wealth through investing, I focus on probability rather than speed. The most important ingredient for improving those odds is time. Ultimately, time is also what reduces the role of luck in investing. Set things up so that time works in your favor, and results will inevitably follow. If you are not afraid to give your investments time, they will gradually move out of the realm of luck and closer to the realm of inevitability. People who understand this are bound to become wealthy in the end. These are simplified principles, but if you have not had a clear strategy, even this much of a change can transform your investment results.

Investing is a series of decisions. To put it a little grandly, you could call it “the art of decision-making.” The ability to decide where and how much of your limited time and money to invest, without being swayed by your emotions, is one of the most useful skills you can apply anywhere in life. I believe that becoming better at investment decisions makes you much better at other decisions in life, too. That is why I do not see investing as merely generating returns and making money. There are too many benefits beyond investing itself to define it simply as “committing assets in the hope of future gains.”

We invest to change our lives, but the process of investing changes our lives too. Investing ultimately means anticipating how the world will change. That inevitably keeps us curious about new things and pushes us to keep learning. It also takes us beyond our familiar, narrow circles and gives us a broader view of what is happening in the world, naturally encouraging us to live with an eye toward the future. Add the financial rewards and control over our time that investment skill can bring, and there is also the joy of shaping our own destiny through our own efforts.

III. Investment returns are not proportional to effort

There is a misconception that the market will reward you for working hard to learn about investing and trading diligently. But the market is not a school. It does not care who studied hardest. Before you study, you need to know which subject the market is testing right now. If you fail to notice that the criteria have changed, you become a student diligently studying the wrong subject.

There is a saying: “To someone with only a hammer, every problem looks like a nail.” A student who has studied nothing but computer science cannot understand why their answer on a literature exam is wrong. Unable to understand either the author’s intent or the examiner’s, they conclude that the question is wrong and the market is mistaken.

Once you believe you know the right answer, you keep repeating, “The market is irrational” and “It will eventually return to where it belongs.” As you force a changing world to fit familiar theories, you begin to see only the information that supports your analysis and dismiss everything else as “noise.” Of course, the subject may eventually switch back to computer science, and the market may return to the “right place” that student wants. Even a broken clock is right twice a day. But when the exam switches back to literature, will that student be able to respond?

Market value does not simply mirror an asset’s actual value. It depends on the thoughts and emotions of the people looking at it. From the perspective that “prices should accurately reflect an asset’s actual value,” the market is often wrong. There are certainly severely undervalued assets and excessively overvalued ones. But that does not mean the undervaluation will soon be corrected or the overvaluation will quickly disappear. Some markets, such as Korea’s KOSPI in the past, have remained undervalued for more than a decade. Meanwhile, stocks criticized as overvalued sometimes attract even more money.

The market is not particularly uncomfortable with being “wrong” in this way. In these cases, is the market really wrong, or is our standard for judging right and wrong itself mistaken? The purpose of studying investing is not to accumulate knowledge in a single subject. You need to be able to respond when the subject changes. The world does not follow what you study. The world moves first; your learning follows.

When my analysis stops working, the first thing I need to check is whether the market is temporarily irrational or whether the subject has changed altogether. The market can certainly behave strangely for a few months. But if I keep getting it wrong for years, no matter how much I study, the criteria that market participants consider important may have changed.

When those signs appear, I need to put my pride aside and be ready to revise or abandon my analysis at any time. The purpose of investing is to get on board with where the world is heading, not to prove that I am right. Even if everyone in the world looks like an idiot, I should not try to beat them. I need to play the game of predicting what those idiots will do next. If I cannot do that, then I am the idiot.

IV. The scale of your questions determines the scale of your returns

Big returns come from big questions. Before asking, “What should I buy now?” you need to ask why. “Where is the world heading?” To change your life through investing, you need to recognize change early and find the companies that will lead it. If you ask only which stocks to buy without that context, the answers can only be fragmentary.

Even after getting an answer to a small question, a mere 5% drop in the stock price the next day brings you back to the same question. “The stock has fallen. Should I still hold it?” That happens because you started with “what” without first thinking about “why.”

Someone with an answer to a big question, on the other hand, can explain why they own the stock. “The world is moving in this direction, and this company is at the forefront of that change.” Someone who starts from that judgment knows what to check first, whether the stock falls 5% or 50%. “Has the world’s direction changed?”

If the direction has not changed, the decline is an opportunity to buy at a lower price. Being able to explain your “why” means you can withstand volatility as long as that “why” remains intact. And only by withstanding volatility can you turn that understanding into returns. If you look only at individual stocks, daily price movements become a source of confusion and fear. But once you start reading the broader direction of the world, you can let go of the compulsion to attach a plausible explanation to every day’s price movement.

That is why I do not use a bottom-up approach, starting with individual stocks and working up to industries. Instead of analyzing popular stocks one by one, I start with the world’s broad trends. “Where is the world heading now? Which sectors will benefit from this change, and which will decline?” Only at the very last step do I look for specific stocks. This is the “top-down” approach.

What matters here is the company’s role within the changes taking place across its industry. I call this way of reading the context “narrative investing.” A narrative is more than a one-line theme such as “AI is taking off” or “Bitcoin is rising.” It is a broader story that explains why the world is moving in a particular direction. And strong narratives usually emerge at the intersection of three things: technology, social trends, and policy.

V. The three pillars that move the world

The first pillar is technology. Technology is one of the most powerful forces changing the world. The internet changed the world in the 1990s, smartphones changed it in the 2000s, and AI is changing it now. When technology opens up new possibilities, the companies that use it also grow rapidly. The questions to ask are these. “Which technologies are changing the world right now? Which companies are best at developing or using them?” As demand in a new industry grows, bottlenecks appear wherever supply cannot keep up. Investors need to find the companies that control those bottlenecks.

The second pillar is social trends. Even the most innovative technology cannot find a market unless society adopts it. You need to read how lifestyles, spending habits, and values are changing. When remote work became routine after COVID, cloud companies grew rapidly. It was less that the technology had suddenly improved than that society had started using it every day. So the questions to ask about this pillar are these. “How are people’s lives changing? Which industries will that change bring money into?”

The third pillar is policy, or politics. Even when the technology exists and society wants it, a market struggles to grow if the government blocks it. Conversely, government support accelerates growth. Alibaba and Tencent’s share prices halving during China’s crackdown on big tech, and the surge in related investment following U.S. support for domestic semiconductor production, illustrate this. The questions to examine here are these. “What future does the most powerful authority, the government, want? What policies is it pursuing to bring that future about?”

A field with innovative technology, a society that wants it, and a government that supports it. The moment these three pillars align, money flowing into that field becomes almost inevitable. Conversely, a narrative loses strength when the technology is good but people are not ready to adopt it, when society wants it but the government restricts it, or when the government supports it but people have no interest.

As you become interested in investing, you sometimes get a gut feeling that a particular field is about to take off. Checking these three pillars one by one can help you judge whether that feeling is merely a hope or a judgment grounded in evidence.

Of course, this process is not always right. The narrative itself can change as technology, trends, and policy change. A bottleneck you anticipated may clear much faster than expected, or an entirely different variable may emerge. So, as I said in the previous section, you should not stubbornly insist on your view to the end. You need to be ready to revise your thinking whenever the world moves differently. Remember that the point of narrative investing is to get on board with where the world is heading, not to prove that you are right.

VI. Read the seasons, not the weather

There is a historical reason narratives are becoming increasingly important in investing. For a long time, fundamental investing dominated the market. After the Great Depression of 1929, securities regulations were overhauled, and companies began disclosing their financial information. Buffett’s mentor Benjamin Graham systematized discounted cash flow (DCF) analysis, which converts future cash flows into present value. For roughly the next 80 years, the view that a company’s future earnings determine its stock price stood at the center of the market.

Early on, “cigar-butt investing” was popular: analyzing disclosures to find companies trading for less than their net assets. But after decades of rising stock markets, such companies became harder to find. The focus of investing shifted from “buying a fair company at a wonderful price” to “buying a wonderful company at a fair price.” Buffett, too, adapted to the times, moving toward finding wonderful companies rather than insisting on cigar-butt investing.

With stock markets continuing to rise, we now live in an era when “you have to buy wonderful companies at very high prices.” Even so, investors continue to use earnings and numbers to search for companies that are at least a little less overvalued.

The idea that earnings and numbers determine stock prices sounds reasonable. But once you invest, you realize that markets do not always work that way. I think investing is closer to psychology, or more precisely “macropsychology,” than to economics or mathematics. Ultimately, it is people’s psychology that moves prices.

The efficient market hypothesis taught in economics says that “all publicly available information is already reflected in prices.” But this theory fundamentally assumes rational people. The problem is that people are not always rational. More important than the information itself are the people receiving it. In real markets, we cannot ignore the inefficiencies created by human irrationality in interpreting information. The same news can make people cheer one day and panic another. Market prices reflect not only an asset’s intrinsic value but also the thoughts and emotions of the people looking at it at that moment.

This reveals something important about how markets work: asset prices do not directly reflect value. The only thing prices directly reflect is market sentiment. Every fundamental variable, from changes in an asset’s value to economic trends, political conditions, and policy changes, passes through market sentiment before it is reflected in the price. So “prices reflect value” is not quite accurate. A more accurate statement is: “Prices reflect sentiment, and sentiment reflects every variable, including value.” A 10% decline in an asset’s value does not mean its price will fall exactly 10%. If fear grows, the price might fall 30%, then rise 30% again when the mood changes.

Fundamental analysis has long been accepted as the right approach. But because everyone uses the same criteria, it is becoming increasingly difficult to beat the market with those criteria alone. As the 2020s began, the prevailing approach to investing started gradually shifting toward narrative investing. Cases kept emerging that were nearly impossible to explain through the standards of fundamental investing.

Palantir is a prime example. Its price-to-sales ratio (PSR) is 80 times, and its price-to-earnings ratio (PER) ranges from 100 to 200 times. Looking only at the gap between its DCF valuation and its stock price, it seems close to madness. But Palantir has a narrative: it is leading the U.S. government and military’s transition to AI. The technology of its AI platform, the trend of governments and businesses making greater use of data, and the Department of Defense’s AI adoption policies all point in the same direction. As long as that story holds, traditional valuation alone cannot easily explain the stock price.

In his 1936 book, economist John Maynard Keynes compared stock investing to “a beauty contest in which you try to predict whom others will choose as the winner.” Reading the crowd’s next judgment matters as much as a company’s intrinsic value. Perhaps narratives have always been the market’s default, and fundamental investing, which gained influence after the Great Depression, was itself just a passing trend.

“Predicting the weather is hard, but you can predict the seasons.” No one knows whether stock prices will rise or fall tomorrow. That is the weather. But we can read where the world is heading and what future the most powerful people are trying to create. That is the season. The “three pillars that move the world” and narratives are tools for reading these seasons. People who can read the seasons are not shaken by the weather changing every day. Instead of riding an emotional roller coaster through daily fluctuations, they can create opportunities for themselves within the broader trends.

VII. The biggest risk is missing the upside

Predicting the weather every time is difficult, but anyone can anticipate the changing seasons to some degree. Even in an era of upheaval, some broad trends look like inevitable changes. If you ignore erratic stock price swings and get on board with those inevitable trends, you can change your life without anxiously staring at charts all day. Tomorrow’s stock prices may rise or fall. But over a sufficiently long period, even matching the average return of the asset markets can produce quite good returns. In other words, the shorter the time frame, the closer your odds of winning are to 50%; the longer the time frame, the closer they get to 100%.

Given a choice between a game you might lose (short-term trading) and a game you are guaranteed to win (long-term investing), the latter should be the obvious choice. Yet, surprisingly, many investors pass up the game they are guaranteed to win and jump into the one they might lose. This is partly because they fear losses and want to avoid declines, and partly because the game they are guaranteed to win is more boring than they expect.

Many people think a decline is something to avoid whenever possible. I see it differently. In asset markets that trend upward over time, what we should really fear is missing the upside, not suffering a decline.

J.P. Morgan conducted an interesting study of the U.S. stock market. It compared the returns of someone who stayed invested in the S&P 500, an index of the top 500 U.S. companies, for roughly 20 years from January 2003 through December 2022 with someone who was invested over the same period but missed the 10 best days. The latter ended up with less than half the wealth of the former. In other words, missing just the 10 best days out of 20 years puts your returns below average.

Someone who missed the best 60 days ended up with only about 7% of the wealth of someone who stayed in the market throughout. There are a few days each year when the market rises sharply, and missing even one of them can make it difficult to keep up with the market’s average return. The important point here is that, surprisingly, the sharpest rallies in investment history have always come amid the sharpest market declines. In 2020, when COVID hit, the U.S. stock market’s second-best day of the year came immediately after its second-worst day.

This is where my long-term investment perspective comes from. The biggest risk is missing the upside, not suffering a decline. The moment you leave the market, you expose yourself to that risk. That is why I choose to stay invested.

During a downturn, many investors decide, “I should get out of the market entirely now,” afraid that prices might fall further. But saying, “I’ll sell everything now and get back in later,” is essentially saying, “I’ll time the market.” Selling because you are certain “this is the top” and buying because you are certain “this is the bottom” both fall within the realm of short-term trading, where the odds of winning converge on 50%. If you give up reading the seasons, where the odds are close to 100%, and start playing the weather-prediction game of market timing, it is only natural that your odds fall.

VIII. Include opportunity cost when weighing risk and reward

Risk-Reward Ratio = (L × pL) + (G × pG)

Strictly speaking, this formula is closer to expected value than a ratio. I call it a “risk-reward ratio” as an intuitive way to consider losses and gains together.

To understand risk and reward more fully, consider what Meta founder Mark Zuckerberg said about Meta’s investment in AI infrastructure. In 2025, amid market fears of a bubble and excessive AI spending, Zuckerberg decided to pour more than 100 trillion won into AI infrastructure in a single year. He explained it this way.

“The worst-case scenario if we go ahead with the investment, if AI turns out to be a short-lived fad, is that we have built infrastructure a few years ahead of when we would have used it anyway. Of course, there will be losses from depreciation, but they will be manageable. But the worst-case scenario if we do not invest, if we invest conservatively out of concern for the risks while a competitor pulls decisively ahead in AI and the gap becomes impossible to close, would threaten the company’s survival.”

Risk and reward are relative. Even if my choice looks good, I need to reconsider if another choice is much better. I have to compare not only the upside and downside of investing but also the consequences of not investing. In Zuckerberg’s reasoning, the worst outcome of not investing is not breaking even. It is falling behind the competition permanently, unable to catch up, with the company’s survival at stake. By contrast, the worst outcome of investing is merely some excess investment and temporary depreciation losses. When the worst outcome of doing nothing overwhelmingly exceeds the worst outcome of acting, making the bet can be the rational choice.

Even in the face of a massive shift like AI, many people decide, “I don’t know much about investing, and it looks risky, so I’ll stay out.” But if that shift really changes the world and I am the one who fails to get on board, that is also a loss, in the form of opportunity cost. Doing nothing is a decision too. We need to account for the opportunities missed by not acting, just as we account for the money lost by acting.

It is better to treat the risk-reward formula as a framework for thinking through how to view an asset, rather than a calculator that produces an exact answer. A good outcome does not mean the judgment was sound. It may have been luck. What matters is whether you could explain the asymmetry between upside and downside at the time of the decision. The purpose of weighing risk and reward is not to predict the future precisely. It is to determine whether there is a reason to give this asset a meaningful weight in your portfolio.

To assess risk and reward this way, you first need to understand the upside and downside the market currently sees. At every moment, the market prices in probabilities for various future scenarios. If there is a large gap between the probabilities the market sees and those I see, the size of that gap is the size of the return opportunity. So when assessing upside, the important question is not “How large is the future value?” but “How much of that future value does the market not yet recognize or still doubt?” This is precisely what makes investing difficult. You have to push through the market’s doubts and make choices that intuitively feel wrong.

IX. My principles for investment decisions

My first principle is to concentrate in proportion to what I know and diversify in proportion to what I do not. Concentration and diversification are not an either-or choice. They are a function of how deeply I understand a particular area. Where I have deep knowledge, I concentrate my investments to make the most of opportunities with asymmetric risk and reward. Where I lack knowledge, I diversify to manage the risk of ignorance. Studying investing is the process of turning areas where I had no choice but to diversify into areas where I can concentrate.

Because nothing in investing is 100% certain, it is also important to take only the risks I can bear. But I must not forget that missing a truly good, rare opportunity for gains is itself a risk. For someone investing to change their life, recognizing a life-changing opportunity and still missing it is a terrible shame.

Opportunities that inspire close to 100% conviction are rare, but so are opportunities large enough to shake the entire world. As shareholders grew more concerned about excessive AI spending, Amazon CEO Andy Jassy wrote this in his annual letter to shareholders in April 2026. “Game changers that upend the playing field usually do not allow for a gradual investment curve. So when you find an inflection point with disproportionately attractive risk and reward, you should invest as aggressively as you responsibly can.”

Some people believe AI will be a passing fad like the metaverse, but the leaders of the global technology industry are convinced that AI’s impact is actually being underestimated. Only the future will tell which side is right. But AI is an opportunity where all three pillars of a narrative discussed in Section V, technology, trends, and policy, align.

The next question is when to buy. My second principle is simple. Once I decide to buy, I buy as soon as possible. Many people keep trying to time their purchase even after deciding to buy. When prices rise, they wait for a pullback because it is too expensive. When prices fall, they wait because they fear further declines. How effective is all this waiting, really?

A 2025 Charles Schwab study compared the performance of five hypothetical investors from 2005 to 2024. Each received $2,000 at the beginning of every year, for a total of $40,000. When they invested in stocks, they bought the S&P 500. The difference was when they bought. Perfect bought at the exact low each year. Rotten did the opposite, buying at each year’s high. Monthly divided the money into 12 equal parts and bought at the beginning of each month. Action bought as soon as the money arrived at the beginning of each year. Linger waited for a better time, holding short-term Treasury bills instead of investing in stocks. What were the results after 20 years?

As expected, Perfect came first with $186,077. Action, who bought as soon as the money was available, came second with $170,555. The gap between Action and the investor who caught every annual low was only about $15,500. Monthly accumulated $166,591, and even Rotten, who bought at each year’s peak, accumulated $151,343. Linger, who did nothing but wait, ended up with just $47,357. Even the investor who bought at the worst possible time every year built more than three times the wealth of the person who never invested in stocks.

The insights from this experiment are clear. The gap between buying at the bottom and buying as soon as the money was available was smaller than one might expect. The reward for getting the timing right is not large relative to the effort and stress involved. The investor who entered the market promptly also earned higher returns than the one who bought in monthly installments. It proves the investing adage, “Time in the market beats timing the market.” In terms of risk and reward, staying out of the market while waiting for the right moment and missing the upside can be more dangerous. The cost of delaying action can exceed the cost of bad timing.

Buying is more than acquiring an asset. It means aligning my future with “the future this asset is heading toward.” At its core, then, a buying decision is a bet on the future, not a question of price or timing.

Within an investment worldview where “asset markets in a fiat monetary system trend upward over the long run,” being invested in a growing market is the default, and every day outside the market carries an opportunity cost. If I have already decided to buy because I believe prices are likely to rise over the long term, postponing the purchase without a specific reason is not rational. It is equivalent to believing I can predict short-term rises and falls. As I said in the previous section, reducing bets on unpredictable weather (short-term volatility) and focusing on bets on the seasons (the long-term future) is the key to moving investing out of the realm of luck and into the realm of inevitability.