Getting Rich (6) An Investment Strategy for a 'Guaranteed Win'

Author: Xiaolai Li, Serial editor: Mr. Y

Introduction

Today, we're sharing an investment strategy that has been proven to be almost a "guaranteed win". It comes from a successful investor, Xiaolai Li, who has been consistently achieving excellent investment returns for many years. Therefore, this can be seen as investment advice you can follow with confidence, even "blindly".

What set Xiaolai Li apart from other investment masters was that he didn’t just share his conclusions. More importantly, he used the simplest terms to clearly explain the principal reasons behind “why he bought what he bought”.

The essence of Xiaolai Li's investment philosophy lies in using 'certainty' to combat 'uncertainty.' The investment targets he chose must be the most prominent beneficiaries of major global economic trends. This way, investment returns are no longer a gambling-like "surprise" but an "inevitability" of the trend's evolution. What he did was not to predict the future but to see the reality clearly and follow the trend.

To make this profound thinking concrete, Xiaolai Li created his own unique investment return formula based upon William Sharpe's asset pricing model. This formula clarifies the critical factors that determine the success or failure of different investment strategies. The formula is as follows:

P = δ + α – γ

Each variable on either side of the equation represents a different part of your investment return:

• P (Performance) represents your total investment return.

• δ (Delta) represents the average return of the entire market. It's directly tied to the "temperature" of the macro-economy. You can think of it as the portion of your return from "a rising tide that lifts all boats." Various market indices, like the S&P 500 for the U.S. economy or the MSCI World Index for the global economy, are good approximations of δ.

• α (Alpha) represents the excess return you get through active, superior choices, the profit you earn above the average return of market. The way to increase your α is to focus on the fastest-growing parts of the economy. For example, choosing the most prosperous economy (like the U.S.), then focusing on its most dynamic industry (like the internet), and even further selecting the most outstanding American companies in this field. The greater the momentum of the trend you choose, the higher your α can be.

• γ (Gamma) represents the potential gains that were lost due to the investor's own mistakes. Gamma is the "self-inflicted damage" in investing. For instance, as Xiaolai Li has demonstrated in his articles with simple mathematics, vainly trying to leverage the short-term price fluctuation through frequent buying and selling is the most common way to increase your γ and lead to losses.

Based on the formula P = δ + α – γ, Xiaolai Li's strategy can consist of two aspects:

• How to increase α (excess return)

Xiaolai Li's method was to design an open-source formula for a cryptocurrency investment called BOX¹. He believed that blockchain was the fastest growing and most prominent niche within the macrotrend of digitalization. To capture its enormous value appreciation while effectively hedging against the intrinsic risks associated with any single asset, he selected several dominant cryptocurrencies to form a basket of assets, that is BOX.

• How to reduce γ (losses from human error)

The method Xiaolai Li proposed was a paradigm of so-called "great principles are simple." He masterfully showed us that Regular Investing was the best way to minimize γ. This was because it simplified the complex process of investing down to a single action, buying. The fewer actions you take, the lower probability of making a mistake, and automatically, your γ approaches zero.

Therefore, the entire strategy is crystal clear: Choose an asset whose long-term value is hard to dispute, like BOX or BTC, and then use Regular Investing to continuously buy the selected asset with undivided attention over the next two major cycles (approximately 6-8 years for cryptocurrencies).

And this isn't just theory. As the editor of the "Getting Rich" serial, I started regular investing in BOX myself during the bull market of May 2021. I continued for slightly over a year, stopping in the bear market depths of July 2022 (because I needed the cash for other personal matters). Even so, as of today (July 2025), the net return on that investment is still over 100%.

This path is real and true. Keep going on, and I'll see you at the top.

Main texts

2.5 The Trend Within the Trend

by Xiaolai Li, rewritten in English by John Gordon & Xiaolai Li ©2019

Choices are the most important thing, especially in investing. If we review what we've gone through so far, we have already made many choices:

• One or everything (global)

• The best parts (regions)

• The best parts of the best parts (sectors)

• A combination of the best investments in the best parts of the best parts

It's a lot of decisions, but they are easy to summarize. All of them are decisions about trends. Not choosing just one investment, but stepping back and choosing to invest in everything, is done in order to reduce risk and keep up with the global trend. In this case, alpha is zero. Choosing the best parts of the whole is done in order to find the parts that are developing the fastest, and in doing so create positive alpha. Choosing the best parts of the best parts is done to create even higher alpha by following trends. Finally, choosing combinations of investments in the best parts of the best parts is pursuing the same goal: first reduce risk, and then see if it is possible to increase alpha.

In order to choose our combination of investments, the most simple, direct, brutal and effective principle is this:

Match the sector's development trends.

Below, I will take BOX as an example, because it is a combination of investments that was chosen through this process.

Risk Warning

The strategy of regular investing is objectively correct, but it is impossible to remove subjective judgment from the choice of investments for regular investing. So the choice of investments for regular investing is the responsibility of each investor. Each investor must use their own money and time over the long term to take responsibility for their own choices. Please be cautious.

This section is primarily about why, in July of 2017, I chose BTC, EOS, and XIN to be the initial components of BOX, and it necessarily contains some of my own subjective judgments. You must use your own objective understanding of the objective world to choose your own investments.

Conflict of Interest Notice

• I am a long-term holder of BTC (from May of 2011)

• I was an angel investor in BlockOne, which developed EOS (initial investment in May of 2017; all shares sold in 2018)

• I was an angel investor in Mixin Network (October of 2017)

After eight years of observation, thinking and practice, I think that blockchain technology has a development path that is slowly becoming apparent:

Trusted ledger (BTC) → Trusted platform for code (ETH/EOS) → Trusted execution environment (Mixin) → Trusted hardware (?) ...

Bitcoin was the world's first blockchain application. At its core it is an open, transparent, immutable, distributed, trusted ledger. Projects such as Ethereum and EOS, which came along later, have the goal of becoming a blockchain application platform, which is to say that application code can be written to and executed on an open, transparent, immutable, distributed, trusted ledger. Putting a ledger on a blockchain allows a trusted ledger, and putting application code on a blockchain allows for trusted code. Mixin Network combines a Trusted Execution Environment (TEE) and a Directed Acyclic Graph (DAG) to create an open, transparent, immutable, distributed digital asset storage network, or a trusted execution environment. Maybe in the near future we will also see trusted hardware.

There is one final reason why I chose these investments. From inception until they are widely accepted, almost all technologies go through the following three stages:

Inception → Adoption by businesses (2B) → Adoption by individuals (2C)

From this perspective, EOS is a blockchain platform for businesses, and Mixin Network's first dApp, Mixin Messenger, is a platform for individuals. One of Mixin Messenger's most important components -- in fact it is a base-layer feature of Mixin Network's public chain -- is a distributed, multi-coin wallet with the best user experience in the industry.

Furthermore, these three investments have reached the "undeniable" stage. Of course they haven't been accepted by everyone, but no one can deny their value. This is the best time for regular investors to enter the market.

In January of 2021, more than 500 days after the establishment of the BOX Regular Investing Group, the components of BOX were adjusted for the first time. Currently BOX includes seven components:

• BTC

• EOS

• ETH

• DOT

• MOB

• UNI

• XIN

At this point, BOX has evolved into a rather mature "Digital Assets Index ETF". The following chart shows the returns on BOX from July 12th, 2017:

Note: Click this link to see the orignal data

There has long been debate in the investment world about whether alpha -- results that beat the market -- actually exists, even though rare investors such as Warren Buffet, Joel Greenblatt and Ray Dalio have consistently beaten the market over the long term. There's a joke that shows the silliness of blind adherents to "efficient market theory":

A student saw a hundred-dollar bill on the ground and exclaimed to his professor, "Look! Is that a hundred-dollar bill?" The professor didn't even design to look, saying, "That's impossible! If it were really a hundred-dollar bill, somebody would have picked it up a long time ago."

If the market² were 100% efficient, then alpha could not exist. The problem is that, if we look at any given moment in the market in isolation, it's 100% inefficient. Price and value sometimes matching up doesn't mean anything -- even a broken clock is right exactly twice a day! If we put all of the individual moments back together, then over the long term the market should be efficient, but how long is long term? No one knows. If we look at it from the perspective of a regular investor, after two full cycles, the variance between the current price and the historical price at any given moment will seem even greater.

Obviously, I believe that alpha exists, and I'm always thinking about how to find better strategies to create it. If you do well, alpha is positive; if you do poorly, alpha is negative. As a regular investor, your final results can be described by the following formula:

p = δ + α – γ

p represents your final performance. δ, or delta, the fourth letter of the Greek alphabet, represents the performance of the overall market. γ, or gamma, the third letter of the Greek alphabet, is borrowed from a concept introduced by Morningstar in 2013. My definition of gamma, however, is slightly different. Here, gamma refers to returns that you would have gotten if you hadn't made mistakes. This is an extremely important and interesting concept, and it is one of the core concepts explored in Part Three of this book.

β, or beta, the second letter of the Greek alphabet, refers to the correlation between your returns and overall market returns. When beta is 0, they are completely uncorrelated. For instance, if you "regularly invest in US dollars", then your returns will be completely uncorrelated with the stock market. When beta is 1, your returns are 100% correlated with the market. In our equation, p = δ + α - γ, delta is equivalent to a beta of 1.

For regular investors, all alpha comes from careful decisions that are made before starting to invest. Regular investors are lucky in that once they start investing they don't need to worry about things like choices, adjustments, or other issues that keep other investors up at night.

As you have seen, the choice of investments for regular investing doesn't require many tactics or smarts. As long as you get the process basically right you should be okay. However, the difficult part of being a regular investor is that even before you start you have to be sure that you have made your choice and will stick with it over the long term. This is probably the best example I can come up with of how something can be "simple but not easy".

Your final returns will match up with this equation:

p = δ + α – γ

In this equation, gamma (γ) will always be positive, because all people make mistakes, and they all make the same mistakes...

3.1 Winning Without Fighting

by Xiaolai Li, rewritten in English by John Gordon & Xiaolai Li ©2019

In his book, The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing, Michael J. Mauboussin shared the following image:

Activities on the far right, such as chess, depend 100% on skill, and there is essentially no luck involved. Activities on the far left, such as playing slot machines, depend 100% on luck, and there is essentially no skill involved. Most of the rest of the activities in the image depend on some mixture of luck and skill. So in most situations, if you want to be hugely successful, you have to be more skillful than others and also get lucky. Investing, however, is on the left side of the picture, implying that luck is more important than skill. In fact, luck is much more important than skill, which is why so many smart people end up being unsuccessful in the trading markets.

However, since there are many different types of investing, we need to slightly adjust Mauboussin's placement of investing in the image. For example, long-term holding and frequent trading are clearly completely different. Also, carefully selecting assets to hold over the long term is generally acknowledged to be a successful strategy. If someone doesn't believe this, just show them the chart of the S&P 500 over the past several decades. Regular investing is at its core simply an improvement to the strategy of carefully selecting assets to hold over the long term. Since it hardly depends on any luck, this type of investing should actually be on the right side of the image.

Regular investors only do one thing:

Buy.

Regular investing seems so simple that most people will initially doubt its effectiveness. They think that making money is so difficult that there must be some sort of advanced secret. They say, "That's impossible. How could it be so easy to make money?" When faced with the simple and the complicated, people always want to choose the complicated, because they mistakenly assume that if something is complicated it must be more advanced.

But please take note: the power of regular investing comes precisely from the fact that it only involves doing one thing. This is because doing only one thing means that regular investors have no room to make mistakes by doing other things, which ensures that gamma is 0. All you have to do is buy. In the future you will understand that doing other things is a mistake that may greatly increase gamma.

What about people who think they have all sorts of tricks? If we look at it logically, we will see where their weaknesses are.

For example, we know that regular investors only do one thing: buy. And those with lots of tricks? They want to carry out the well-known secret strategy of "buy low and sell high", so they need to buy when they should buy, and then sell when they should sell. The problem is, when should they really buy? They don't know for sure, and each time they buy it's only when they think they should.

To take it a step further, these frequent traders are missing a key point: in order for their strategy to work, being right just once isn't enough -- they have to be right twice. They must buy when the price is really low and sell when the price is really high. It's the combination of these two trades that will produce the result they're hoping for. If they only get one of the steps right, their effort was all for naught.

If they were able to be right every time, buying when they should and selling when they should across multiple trades, then that would be great! But without help from some higher being, they've basically got about a 50% chance of selling when they should buy and buying when they should sell. They just added one thing (trying to buy low and sell high), and their chances of success have dropped from 100% to 25%.

Regular investors are different. Each time they buy they are "buying low", because, if they eventually decide to sell after two or more full cycles, the price that they initially bought at will always seem cheap. See? That well-known secret of "buy low and sell high" is always working for regular investors.

Frequent traders are definitely not willing to concede this point. "How could I have a 50% chance of making a mistake?!" Alright, let's say you have an 80% chance of being right. Actually, you have to be right twice in a row, so your chances of success are only 80% x 80% = 64%. That's still much lower than 100%! Furthermore, if you have actually tried investing using your own money, you know that being right 80% of the time is incredibly unlikely. If you're right even 60% of the time you can be considered an expert! And if you're right 60% of the time, your chances of being right twice in a row drop to 36%. This explains why the vast majority of investors end up thinking that every action they took was wrong. Once you understand that short-term price movements are an unpredictable "random walk", you will understand why the chances of success are really 50% x 50% = 25%. No more no less.

But we're not done yet! Another hidden and serious detail has been left out. Frequent traders don't understand that what they are depending on is judgment after the fact. Putting aside whether their judgment is correct or not, by the time they realize something, and think, "Oh, this must be an upward trend", they've already missed a portion of the rise in price. And by the time they realize, "Oh, this looks like a downward trend", they can't avoid having participated in some of the drop in price.

This phenomenon is easy to see in the picture above. Even for the 25% of the time that they are right twice in a row, they actually only make about a third of the profit that they think they should. In their imagination, they buy at A and sell at B, but because their judgment of the short-term trend is actually made after the fact, they actually buy at A' and sell at B'.

Just as an aside, the core problem with momentum investing, which many people seem to fall in love with, is basically the same. Since you can only base decisions on judgments after the fact, even if you do everything right your gains are still smaller than you had imagined.

But there's still more! Another detail that must be considered is that the chance of guessing right is actually much lower than 50%, because in addition to going up or going down, the price could stay the same. So our odds of guessing correctly are actually 1/3 instead of 1/2, and our chances of guessing correctly twice in a row are even more startling: 1/3 x 1/3 = 11.11%...

Even worse, these traders don't just have one more thing that they do, they have tons of things that they try to do! For instance, not only do they trade frequently over the short term, they also switch between different investments. It's already very unlikely to make one correct decision to switch from one investment to another, and yet they switch frequently! Even if they're likely to be right 80% of the time, if they switch four or five times their chances of being successful drop below 40%.

Those who constantly research all kinds of investment tactics are even worse off. They read a random investment guide or listen to an investment lecture and are as excited as if they'd reached enlightenment. They can't wait to try out each new strategy. In other fields, this eagerness to find and try new tactics can be an asset, but in investing it can be deadly. Most investors end up being defeated by this sort of behavior, because the price of experiments in investing is so high!

This is why most investors who are truly able to reflect on their behavior after some time in the market resign themselves to accepting the following fact:

Everything I tried to do was wrong.

Their conclusion is not incorrect, because the more things they did the more likely they were to be wrong, and it all happened without their being aware of it. They didn't know that all of their short-term trading strategies depended on luck; they didn't know whether their strategies were really effective; they didn't know that they had to be right twice in a row to be successful; they didn't know that they were missing two thirds of their potential profits because they were making judgments after the fact; and they definitely didn't know that there is a cost to turning even correct knowledge into action. In the face of these factors, even the fees that Warren Buffett has called "vampires" -- because they can kill your returns -- don't seem so scary.

Behavioral economist Meir Statman once referred to a Swedish study which showed, based on figures from 19 stock exchanges, that accounts which traded frequently lost an average of 1.9%-4% per year. A paper by Brad Barber and Terrance Odean showed that men traded 45% more frequently than women, and that men had 1.4% lower yearly returns. Single men traded 67% more frequently than women, and had 2.3% lower returns. A study by Vanguard discovered that the returns of accounts that frequently changed strategies lagged far behind those of accounts that never changed strategies (see Chapter 2 of Daniel Crosby's The Behavioral Investor).

Based on the figures above, frequent traders will likely have a gamma of at least 2%, whereas, had they just bought and held, their gamma would have been 0. Don't underestimate this 2%, because over 30 years a gamma of 2% will cost you 45% of your returns! So we can see that regular investing is the best strategy for winning without fighting.

Note:

1. BOX is an abbreviation for the three underlying components of BTC + EOS + Xin. These three components were the initial components of BOX. Over time, several more components have been added.

Because BOX is an ETF designed by Xiaolai Li, it is also nicknamed "leek box" and "regularly investing in BOX" is jokingly referred to as "always eating leek box".

Buying and the redemption of BOX are available on the b.watch website: https://b.watch.

In January 2021, 500 days after the initial release, BOX underwent its first adjustment, the components of the BOX becoming seven: BTC, ETH, DOT, MOB, EOS, UNI, and XIN.

In 2023, BOX's components were further modified, becoming the asset portfolio presented today (July 2025): BTC, ETH, XIN, UNI, DOT, and SOL.

2. The market mentioned in this sentence is not the same as the "market" in economics. In the field of economics, market is referring to the mechanism or environment in which buyers and sellers conduct transactions. The market mentioned in this article clearly referred to the financial market where people exchange stocks or tokens such as cryptocurrencies.

According to Austrian economist and Argentine President Mille, "There is no such thing as an inefficient or inefficient market (in the economic sense), as long as transactions are based on the genuine intentions of both parties."

The market mentioned in the "efficient market hypothesis" in this article clearly referred to the financial market. Therefore, the "efficient market hypothesis" in this sentence meant "whether the transaction prices of assets in financial markets truly reflect the intrinsic value of those assets."

Copyright & Licensing Notice

The main texts of the "Getting Rich" serial are licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives (CC-BY-NC-ND) license.

Original texts link: https://ri.firesbox.com/#/en/

The introductions and annotations in the “Getting Rich” serial are © 2025 Mr. Y.

You are free to share the original texts in accordance with the CC-BY-NC-ND license (non-commercial use, no derivatives, credit required).

When reprinting the "Getting Rich" serial together with its introductions and annotations, please

credit “Xiaolai Li” as the article author and “John Gordon & Xiaolai Li” as the translator and “Mr. Y” as the editor and include a link to this serial on this website.

All other rights reserved.

Proof of first publication: the SHA-256 hash of the "Getting Rich" serial has been immutably recorded on a public blockchain, serving as verifiable timestamp certification of copyright ownership.