"I think there is something in the Chinese culture or personality—we don't like to sell our possessions. We have an emotional connection to them," Zheng posits. For one of Zheng's friends, that emotional tie has produced losses of 200,000 yuan—so far. (That's $28,600—several times the average annual income of an urban resident of China.)

Mark Mobius, a portfolio manager with Franklin Templeton Investments and the dean of emerging-markets investors, began buying Chinese stocks early this decade. He says that battling human nature is going to be tough—especially in China, where the citizenry has a passion for gambling and little knowledge of the way stock markets work.

"The Chinese government could see this becoming a kind of gambling den, so for the last few years they've made developing an institutional market a priority," Mobius says.

Just how painful is China's volatility? Single-day moves of 2 percent or more—the kind of loss seen on April 17, when stocks hit their lowest level in nearly a year—are perceived as normal. On one memorable day in February 2007, the Chinese market slumped nearly 10 percent. Last week, the tax cut pushed Shanghai stocks up 15 percent.

Meanwhile, Rob Lutts, president and chief investment officer of Cabot Money Management, an investment firm based in Salem, Massachusetts, keeps as much as 10 percent of his wealthy clients' assets in Chinese stocks. One of his biggest holdings is China Finance Online, a Beijing-based company offering—more than a bit ironically—trading data and information packages to individual investors.

Even as the stock market soured in the fourth quarter of 2007, the company reported a 24 percent leap in subscribers, some paying up to $45 a month for its Tao of Wealth package.

"People are learning, slowly, that investing is a trickier business and not always a quick path to riches. And that's a bumpy process—but that is good for this company," Lutts argues. "Learning about corrections is part of the process. There is no way back: China's citizens are becoming investors."