Are you investing or speculating?

Section of the course9Partially introduce investment practices. In the investment practice section, I have told you four questions:（1）Asset allocation; （2）Tool selection; （3）Fund fixed investment; （4）The difference between investment and speculation.

The first question is asset allocation. When it comes to asset allocation, many people may not be familiar with it and find it strange. Some students may say that asset allocation is the responsibility of professional financial institutions. As an ordinary investor, investing is buying stocks or funds. What are the asset allocation issues?

This understanding is completely incorrect. The principle of asset allocation is that the properties of different categories of assets are completely different. By allocating them proportionally, the goal of reducing risk and improving returns can be achieved. Moreover, there is often a complementary nature between the returns of different assets, such as when stocks plummet, bonds often perform well. By comprehensively allocating different assets, liquidity, safety, and growth can be balanced. Simply put, it means balancing the preservation and appreciation of assets while maintaining liquidity.

How to do it? There are three basic principles for asset allocation: the principle of getting on board, the principle of balance, and the principle of adjustment.

The principle of getting on the car is that families who have not bought a house must first buy a house and get on the car. Real estate is not only safe, but also has a high return rate. It also carries many social resources and high psychological value. Overall, real estate is a great investment. Students who have not yet bought a house should buy it first and then consider other options.

The principle of balance refers to the balanced allocation of your financial assets, taking into account liquidity, safety, and growth. How to balance? It is necessary to consider comprehensively and allocate funds in a balanced manner to major categories of assets such as monetary funds, bonds, stocks, etc., without being too biased. In reality, many people are prone to two types of mistakes: one is being too conservative, and the other is being too radical, both of which are due to not implementing the principle of balance well.

The principle of adjustment refers to individuals adjusting their asset allocation appropriately based on their own situation. For example, young people can take on more risks and increase the allocation of stock assets appropriately. Retired elderly people should pay more attention to safety and allocate more bond assets. For example, high net worth individuals should pay more attention to the safety of their assets and increase the allocation of safe assets. In addition, it is also necessary to consider the stability of income, liquidity needs, and so on.

The second issue in investment practice is how to select individual assets, that is, specific investment tools, after asset allocation is completed. Among the major categories of assets, monetary funds and bonds are relatively simple, while stock assets are more complex. We will focus on stock assets.

Let's start with the efficient market hypothesis and explain in detail why the vast majority of people are unlikely to receive returns that exceed the market, so they should buy funds. If there are no positive active funds, buy passive index funds. In this lecture, I have told you several stories and examples, which can be said to be meticulous.

No matter what I say, there are still many people who choose stocks themselves. What shall I do? Actually, it's not completely impossible. I have a small suggestion, which is to look at a stock for at least six months before buying it. Think carefully about the differences in this stock and why it outperforms the same industry and the overall market. Most of the time, after thinking for a while, you will give up. If you think about it for half a year and still feel good, it's okay to buy some.

Some students may say, will this miss out on good investment opportunities? You have to look at this issue this way. There are many investment opportunities, and no one cannot be missed. The market rises and falls, and opportunities always lie there. The key to the problem is not whether there are opportunities in the market, but whether you can continue to seize opportunities, earn more money, and lose less.

Choosing stocks, that is, choosing enterprises, involves a lot of knowledge and there are no simple formulas or indicators. If anyone tells you that there is such a formula or indicator, it must be deceiving you. Many people fall for this trap not because they are not clever, but because of human nature. In a world full of uncertainty, humans are always cowardly and seek the comfort of certainty, which is human nature. However, in the world of investment, if you cover your eyes and enjoy such psychological comfort, you need to be prepared to pay the price of money. Overcoming oneself is a daily challenge in investment.

I repeat, money beyond your knowledge boundary does not belong to you. If you must earn that money, you must be prepared to be harvested. Investment, like life, is a long process of cultivation, and there is no opportunity that cannot be missed. The opportunity is there for cultivation. Before that, passive investment would be fine. You can enjoy the average market returns while also watching the four seasons of financial markets change, with flowers blooming and falling. Why not do it?

In the third lecture on investment practice, I will tell you a particularly effective passive investment strategy, which is fund investment. The fixed investment of funds improves our investment returns through two principles: one is the passive timing principle, and the other is the cost reduction principle. These two principles are wonderful and can be achieved through simple and mechanical operations.

There are many details about fund investment, including investment period, investment frequency, investment amount, investment timing, and investment tools. This lecture has a lot of content, is very practical, and many details are important. It is recommended to listen to the text several times to deepen understanding.

In the final lecture on investment principles, I conducted a soul questioning with you: often people tell you to invest and not speculate. What is the difference between investment and speculation? Are we investing or speculating?

The difference between investment and speculation is not only in pronunciation, one is Mandarin and the other is Cantonese, but there are five important differences, namely:

1. Investment is optimistic about the intrinsic value of assets, and buying is waiting for appreciation; Speculation is the psychological value of optimistic assets, expecting others to buy at a higher price, so buy and wait to change hands.

2. The term of investment is longer, while the term of speculation is shorter

3. Investment has low requirements for asset liquidity, while speculation has high requirements for asset liquidity.

4. Investors strive to accurately judge the intrinsic value of assets without making mistakes. They will stop losing as soon as they find mistakes. Speculators are allowed to make mistakes, but expect others to make bigger mistakes.

5. Investors will continue to buy when prices fall, while speculators will choose to sell when prices fall.

6. Investment is the money that earns trends, while speculation is the money that earns fluctuations.

Finally, this6A sentence was put forward by an undergraduate classmate during a lecture at Peking University this year. I think it is very concise and expressive, so I added it. Teacher of One Sentence, express gratitude to this classmate.

Of course, as investors with pure motives, we do not discriminate against speculation. Whether it's investment or speculation, as long as you earn money, it's good, but losing money is not good, there is no distinction between high and low. However, my personal opinion is that investing is more conducive to long-term stable income, and the risk of speculation is greater, making it difficult to achieve long-term stable income.

As for the reason, the expression of this student from Peking University is very clear. Investment is the money that earns trends, speculation is the money that earns fluctuations, and fluctuations are difficult to judge. Even if occasionally judged correctly, it is difficult to continue to judge correctly. Even if you have done it many times, if you don't know how to stop, making a mistake may lead to compensation. This is like gambling, as long as you don't get up and leave, the money you earn will be paid back sooner or later.

Q1Why do you feel like there is still risk in the debt base? During this period, there has been a continuous decline, and within a week, the earnings for a month have been cleared to zero, even turning into negative returns. Is the timing of buying bonds also important?

Short answer: This year5Since the beginning of the month, interest rates have started to rise, bond prices have fallen, and the bond base has suffered some short-term losses. Debt base in the medium to long term, such as2-3Looking at the window for a year or longer, it is basically safe because the losses can be quickly recovered.

Also, this year11During the month, several credit bonds exploded, causing bond prices to drop and many bond bases to suffer losses, but they will return soon. Of course, when buying bond funds, it is important to avoid small scale and overly aggressive bond funds.

Q2Teacher, since the return on the stock market is relatively high and bullish for a long time, why can't young friends maximize their returns by fully investing in index funds after leaving a small amount of working capital? Why buy low yield bonds again?

Short answer: Investment is not only about maximizing returns, but also considering safety and liquidity. The potential returns of stocks are high, but the risks are also high, and the price fluctuates greatly. Bonds and commodity bases should be appropriately allocated to improve the safety and liquidity of investment portfolios.

If you exclude a small amount of funds that are fully invested in index funds, you have actually made two assumptions:（1）There will not be a significant demand for funds（2）I won't be restless due to a stock market correction. In fact, neither of these principles holds true, and even young people may encounter unexpected funding needs. If there is a significant loss on the book when money is needed, it will be difficult to handle. If there is a significant correction in the stock market and money is needed, it will be very uncomfortable and seriously affect long-term returns. Safety and liquidity are essential factors that must be considered when investing.

Q3I have always been buying index funds, but I feel that most active funds can easily outperform Shanghai and Shenzhen300And China Securities500Is this my illusion?

Short answer: This is not your illusion. Although many funds have average performance, there are also many funds that perform well. In fact, China's market efficiency is lower than that of the United States, and actively managed funds can find more investment opportunities, while the average performance of equity funds is higher than that of the market. For example, starting from1997Year to2016Year,19Over the years, the average annualized return of equity funds16.2%Exceeding the average increase of the Shanghai Composite Index over the same period8.5Percentage points.

Q4Excuse me, teacher, in the venueETFIs the fund suitable for regular investment?

Short answer: Suitable. In fact, it is generally recommended to invest in the large market index, such as Shanghai and Shenzhen300Zhongzheng500, Growth Enterprise Market IndexETF。 Science and Technology Innovation50The callback is almost over, Science and Technology Innovation50ofETFit's fine too.

Q5Hello teacher! Can I use a fund company to add flagship funds or cannot I search for flagship funds?

Short answer: Flagship funds are often not indicated, and it is generally sufficient to find a fund with the largest scale and longest duration. Sometimes, the flagship fund of a fund company can also change. Looking at the scale and performance of recent years, one can roughly determine which one is the flagship fund.

Q6May I ask Mr. Xu, what is a negative P/E ratio?

Short answer: The P/E ratio is negative because the company's profits are negative. Because prices are always positive, the calculated P/E ratio is negative. At this point, the reference value of the P/E ratio is not significant, and many times it is not calculated. At this point, other indicators can be referred to, such as price to book ratio and market to sales ratio.

Author: Xu Yuan

Source: Caixin