From cognition to actual combat, reconstruct investment logic.
How do retail investors make money? Remember the eight principles
Source: official account "Zhu Jiu" (redinvest)
Author: Zhu Jiu
There are as many investment models as there are investors. Countless people are ignorant and will only chase the rise and fall. There are also people who work tirelessly to learn all kinds of ideas and wisdom. But the sky is always responsible, some people are more and more difficult the harder they work, they have memorized the master's quotation, but their investment results are just as unsatisfactory.
Wisdom is always wisdom, but wisdom also has applicable conditions.Let's understand the identities of such masters as Buffett, Graham, Peter Lynch and Charlie Munger. They, as well as the famous Feng Liu, Zhang Lei and others in China, are all managers of large institutions. The omni-directional gap in capital scale, manpower, material resources, financial resources and energy determines that an ordinary retail investor can not simply copy their success model.
As retail investors, the difference between us and these masters is like the difference between amateurs and top professionals.Total attack and defense is a very enjoyable tactic, but for amateur teams, it may not last even ten minutes.If an ordinary amateur marathon runner runs at a pace of 330, he will have to fall on the track in less than a few kilometers, which won't get a good place in the official race at all.
The advantage of large organizations is that they can find more money, change the trend of a stock in a short period of time, have the latest and most comprehensive information, and even communicate with the management of listed companies anytime and anywhere, some of which are simply board members.
Buffett is the god of stock, in fact, he is also the god of management. instead of waiting for the appreciation of many enterprises, Buffett directly enters the board of directors, participates in corporate decision-making, and even decides the choice of CEO. Since 2010, Hillhouse Capital has invested more than 300 million US dollars in JD.com, and the first thing Zhang Lei has done is to go to Walmart Inc headquarters with Liu Qiangdong to study logistics network and warehousing system, thus establishing JD.com 's market value.
Just like professional football and weekend football are two different concepts, they both buy Gree Electric Appliances, and what we do is not the same thing as Zhang Lei. Many people look at Gree's share price and sigh, while Zhang Lei is looking at the future of China's high-end manufacturing industry.
When we recite master quotations, we must understand that masters are not speculators. The only thing we have in common with them is that we all like that stock.
"other people are afraid of my greed, others are greedy, I am afraid." this is the essence of investment, but it is very likely that at the time of greatest fear and when the whole warehouse is most needed, the wife will have to sell obediently at the command of his wife. Not only can not be "greedy", but more "scared". There are investors, in the cheapest time in the market, the company is facing bankruptcy, can not even pay wages, what to "greed", this is not uncommon in 2008 and the first quarter of this year. Think of Buffett's legendary $120 billion. That's the essence.
"I am not afraid of concentration. I am not generally concentrated. I am absolutely concentrated. "this is the wisdom of Duan Yongping. However, if a person sees false accounts and does not have the ability and energy to study listed companies in depth, he will have no tears if he or she is centrally owned by Kangmei Pharmaceutical Co., Ltd. You know, before buying NetEase, Inc, Duan Yongping had worked as a "bully learning machine"; before buying Apple Inc, he had built the classic brand of Bubugao. Who dares to say that the understanding of games and mobile phones in China can surpass that of Duan Yongping?
Retail investors should look like retail investors, and learning to walk in Handan is by no means a joke. There is no end to learning. We can think like masters, but we can only invest like retail investors.
Eight principles of retail investment:
1. Only buy stocks that you can understand
To buy a stock is to buy a company, but most of the people who shout "to buy a stock is to buy a company", the company they understand is still a stock. Keep your mouth shut about ROE, valuation, FCF, thinking that this is everything to the company. However, little is known about the company's products, target consumer groups, corporate culture, and even the development direction of the industry.
Will the valuation be a value investor? Is it a value investor to buy and sell according to valuation? People who do not know how to run a business see castles in the air. As a senior retail investor, what I most want to recommend to a newcomer is not those classic investment books, but Philip Kotler's "Marketing principles". We may not understand the production technology, but we should at least understand how an enterprise's products are sold, which is the foundation of investment.
With the exception of a small number of students, most investors have their own working background. if they study stocks, some people are not experienced enough, but they have a much greater say in the industry they are engaged in. Some people even work in listed companies, which is the biggest advantage. Of course, some people will say that this is a traditional industry, a slow-growing enterprise, not worth buying. But every industry has extension, upstream and downstream. As long as you put your heart into it, most people can find the good stocks around them.
There are many goods that are indispensable in our daily life. Banks, food and beverages, condiments, e-commerce, medicines, etc., although they may not have as much understanding of these products as their own industry, buying these tangible and frequently used things is much safer than buying stocks that only know some surface concepts.
In the actual investment, investors are easily paced by some hot spots, and they have worked hard for more than a year, which is not as good as the two-week increase of some stocks, which is a common occurrence.
I have a principle that I have not followed stocks for more than three years, and no matter how good the trend is, I will not buy a single share. I have missed a lot of things in recent years, but I have also stepped on a lot of mines. For the past six years, my annualized return has been above 40%, which is many times higher than my 20% expectation. What I buy is a company whose share price is down 30%, which can put me to sleep. It's easy to step on the mine less, don't know how to do it!
2. Do not pursue excessively high rate of return
The market is fair, and returns are always linked to risk. Stocks that rise slowly generally fall slowly, while stocks that rise fast fall equally frightening. If there is no long-term investment experience through bulls and bears, it is very difficult for most people to maintain a stable state of mind in the face of short-term ups and downs, and tend to form a vicious circle of "others are more scared when they are scared and greedy when others are greedy." Once it is trapped for a long time, the following errors will occur continuously and get deeper and deeper.
Compared with institutions, one of the major advantages of retail investors is that they do not need to pursue such high relative returns and do not have to do too many risky things for the sake of fund rankings or the requirements of investors. For retail investors, the absolute return is real and reliable, which is real money.
More than half of the A-shares have a market capitalization of less than 100000 yuan, while those with a position of more than 500000 yuan only have a market capitalization of about 10%. Given the current wealth situation of the Chinese people, the funds that can be mobilized are much higher than this standard, and people do not dare to invest more money in the stock market, mainly because they still feel that the risk is out of control.
100000 yuan has increased fivefold, and 500000 yuan has doubled, the absolute return is the same, but the degree of risk is completely different. If you don't pursue excessive returns, you can make your exposure to the stock market smaller. With heavier positions, buying stocks that rise slowly but are safer may not yield high relative returns, but absolute returns are more satisfying to investors.
Sometimes slow is fast, and the expected return on stocks is not high, which does not mean that the return on investment is not much. This is the advantage of retail investors, but it is not easy for masters to learn. Buffett is 90 years old and is read by people all day long.
3Understand the purpose and ability of coming to the stock market
As long as they are highly educated, or investors who keep on learning despite their low academic qualifications, it is not difficult to make money in the stock market. Most of the reasons for making seven losses, two even and one profit are because they overestimate their abilities and underestimate the risks of the stock market. To make an investment, you should first ask yourself, why did you come to the stock market? Is it to maintain the value, to increase the value, or to run up against a brick wall everywhere in reality and fantasize about getting rich here overnight? We often meet some people who complain that they have no talent, that they can never make money at work, and hope to achieve wealth and freedom in the stock market. But the stock market is a more difficult place to make money than most jobs, more than colleagues with similar academic qualifications and abilities can not do it, want to beat 90% of the country's high IQ people, why?
Never forget why you started! When many people enter the arena, it would be nice to think that they can outperform financial products, but they become bolder and bolder, especially when they see that the returns of the people around them are higher than their own. When talking about the master theory, he is sensible, but he is often the same as a gambler, pinning his hopes on God. When we make an investment, we should always know where the margin of our ability is, which stocks can be done and which stocks have nothing to do with us. Luck is unreliable. if you have such good luck, you might as well go to Macao.
4National luck is the most definite direction in the next ten years.
In stocks, some people pursue odds and consider certainty, while others pursue odds and consider flexibility. For retail investors, only with strong certainty can they dare to take a heavy position, and there will be more absolute returns. So what is the most deterministic direction in the next decade? Everyone's view of the world is different, so A shares nearly 4000 stocks, each has a trading volume. Regardless of those gifted bulls, for the vast majority of retail investors, it is more appropriate to choose enterprises that are closely integrated with national luck.
In the 1990s and 2000s, many people desperately wanted to emigrate, but in recent years, we have found that many people who went out more than a decade ago have developed no better than their old classmates in China. After 2008, Western Europe and countries such as Japan and Canada are basically in a state of economic stagnation, with the US economy growing by less than 50 per cent (excluding this year's sharp decline), while China's economy has tripled. After this epidemic, the growth gap between China and major developed countries will widen. Ten years later, in the eastern coastal areas alone, the per capita GDP of more than 300 million people will exceed US $40, 000, which is on a par with that of the Japanese today, and the overall economy will be twice as large as that of Japan today. What a big market it is, what a strong purchasing power it is.
In this historic process of development, a large number of enterprises will grow together with the national movement. In my profile, I introduced my investment direction like this: "buy the best companies in China and wait for them to become the best companies in the world." "before the prosperous age, if you can't figure out which industries are more promising, then choose industries that are closely related to national luck, such as banking, insurance, consumption, public utilities, and so on. Although some of them seem to be moving slowly, they will always move forward. Like the little tortoise racing with the hare, it is inconspicuous but absolutely reliable. As for technology and medicine, there will certainly be Daniel, but who will be, the requirements for the professional ability of investors are relatively high, which is not as easy to understand as the above industries.
5To buy shares, you have to buy bibcock.
After the industry has been selected, it is also a question of what type of stock to buy. Many veteran investors like to buy small-cap stocks, and some specialize in St stocks, hoping to make greater gains in the face of adversity. But for most retail investors, it is safer to buy leading stocks that have both the advantages of scale and growth. The advantages of leading stocks are as follows:
1)Good certainty.With the increase of economic volume, the overall economic growth rate will become slower and slower, and the market will move from the same advance and retreat in the incremental stage to the law of the jungle in the stock era, which is what is happening in most mature industries. Large industries such as real estate, insurance, spirits and home appliances are becoming more and more advanced. Dragon stocks are not only safe, but also not slow in growth.
2)Good security.The every move of leading stocks is placed under a magnifying glass, and various institutional research reports and forum analyses can be found everywhere. Relatively speaking, the possibility of thunderstorm is much smaller than that of common stocks. For ordinary investors who have no energy or lack of expertise, they can get the corresponding data and market views in time, which can avoid a lot of blind decisions.
3)Low volatility.It is true that the share prices of leading stocks do not grow as fast as those of some companies in the middle and upper reaches of the industry, but often when they fall, their share prices are also more resilient, investors are more able to hold them, and the annualized rate of return will not be lower in the long run.
4)Enough"Red".Sometimes stocks, like stars, need to be "red". Many stocks have good conditions in all aspects, but the market attention is relatively low, long-term holding requires enough patience, many people suffer for this, often fall before dawn. Dragon stocks have relatively few problems in this respect, as long as the performance is outstanding and the fundamentals are good, the adjustment time is often on a monthly basis, and there are not many leading enterprises that have been undervalued for many years.
When choosing a faucet, you need to pay attention to it. It is not the largest one that is the bibcock. The bibcock must be big enough, but it must also be strong enough. For example, the leader of bank stocks is not Industrial and Commercial Bank of China or China Construction Bank Corporation (their profit growth is indeed a bit slow, so they are more suitable for cash substitutes, or for ultra-low-risk people), but China Merchants Bank, the leading stock company that has maintained double-digit growth over the years.
6Pay more attention to performance,Care less about the stock price
The most memorable thing about stocks is the stock price. Some people can still remember the buying and selling prices a few years ago, which is really admirable. However, many people are not so sensitive to the operating conditions of enterprises, and they are even more lazy to look at the hidden reasons behind these financial data, and some people do not understand them. Profit makes people lose their wits and pay too much attention to the changes in stock prices, which is easy to make people lose their minds.
I often meet some people who talk about how many yuan I made or lost today. Don't worry too much about some things you don't want to lose. It is difficult to predict the short-term rise and fall of the stock price, but you can see it more clearly if you keep a certain distance from the stock price. The relationship between performance and stock price is like hitting the ball in golf, as long as your action is in place, hitting a good ball is only incidental. If the action is not in place, it may be an OB with a swing. Focus on performance, not on the short-term rise and fall of share prices. When valuations are at rock bottom, the growth rate of corporate performance over the next few years will be your future return on investment, as illustrated by the worst banking, insurance and real estate stocks right now.
7Only in the long term will there be less right and wrong.
The shorter the investment, the more likely it is to encounter low probability. The longer the investment, the greater the probability of value return. I am a person who doesn't believe in luck. There are not many things that get twice the result with half the effort these years, but things that get twice the result with half the effort often happen. Very often, I feel that the loss outweighs the gain, but in hindsight, there is nothing less to get. To do the short term, in the final analysis, the attitude of eager for quick success and quick profit is at work, always want to be able to eat every wave of the market, with the least cost to get the maximum harvest. But money does not enter the emergency door, sometimes there can be some small gains, but success nine times, one failure may spit back all the original gain.
If we take the stock that we can understand, we can see its development trend in the next few years, and we can calculate its approximate intrinsic value, then there is no need to pay attention to the short-term gains and losses.
Why do most people who buy a house make money in the past 20 years? Because it usually takes five or six years for a house to be bought and sold. During this period, there has been no change in house prices. It may be up or down. If the house is traded as easily as stocks, many people will get out of the car after earning 20,000 yuan at most, just like Dachun in Charlotte's annoyance. But the house is not sold can be sold, a variety of procedures and restrictions so that you can only look at the changes in housing prices outside the helpless, so in the end you made a lot of money. All kinds of policies about the house are to help you make money, so be sure to understand this good intention.
Truth needs to be tested by time. We must stand on the side of time and make it our friend. Being the enemy of time is the most dangerous thing in the world.
8The circle of ability is a concentric circle.
When I build my own circle of ability, the first thing I choose is the origin of "real estate". This is the industry I have worked for more than 20 years, from front-line sales to corporate financing. I am familiar with all kinds of pits, large and small. When the market is good, I know what the problem is, and when the market is bad, I can also know how to face it. After this origin is established, my circle of ability is basically a little bit of concentric circle around it. The closest to the origin is the bank, and the extension includes home appliances, insurance, cars, spirits and so on. The nearest circle is pig farming, and the pigsty is also real estate.
I think a new industry will take at least 3 years, so it basically does not follow the hot spots. I believe that hot spots that can last for more than 3 years are no longer hot spots. This is a trend, and heavy positions must be invested in the trend.When pig stocks rose sharply in 2017, I realized that intensive farming was a major trend, which was the same as Hengqiang, a strong player in the real estate industry, but I still watched it for three years before I dared to build a warehouse.
To make an investment is not only to think clearly about the business logic, but also to see the business model clearly. Each stock has its own stock nature, which not only has the industry attribute, but also will be influenced by managers and investors. When most marriages finally break up, they leave the words "personality discord". Even if everything is good, the character of some stocks does not match you, it is very difficult for you to grow old together.
It took me more than ten years to build this concentric circle, during which I also dabbled in some unrelated industries, such as film and television media, medicine, high-tech materials, and so on. This is because the new circle of ability is a circle redrawn in a blank space, just like playing go away from the original thick potential, lone chess, even if it survives, the price paid is huge. If you really have an affinity with a stock, why not wait for it for three years?
Edit / Iris