Source: beyond cool

Summary:

This article was written in April to discuss the risk of the stock market. At that time, I wanted to express that during the period of market bottoming out and low trading volume, the stock market seemed to be very risky, but in fact, the potential risk was already very small. The investors in the market are extremely rational people, holding stocks, the relative value of the stock price, no premium, or even undervalued, the margin of safety is very high.

But few people read the article at that time, and now I take this article out again to share with you, the content has been adjusted, this time the expression is that the bull market is coming, it seems that the market is full of opportunities to make money, in fact, potential risks continue to accumulate.

As the main traders are no longer early mature investors, but have become many new investors, the liquidity premium and emotional premium of stocks are getting higher and higher, although they have not yet reached the extreme, but the price is no longer below the value line. but quickly climb above the value line, and even the price is getting farther and farther away from the value.

Therefore, at the stage when new investors enter the market on a large scale, I think the first lesson should be risk education, just like learning traffic rules before driving. Maybe the final result is useless, but what needs to be done may be valuable to some investors.

1. Risk perception

The stock market is a high-risk and high-return investment / speculative market, which is a common sense that every investor will be told when entering the market. The stock market has risks, so you need to be careful when entering the market.

However, most of the time, do investors really have risks in their minds? I often ask myself why we often calculate in our hearts how much we can get from buying stocks in the future and whether they will double, 50%. When we think about these gains, there are a lot of expectations in our hearts. In this way, with good expectations to join a high-risk world of jungle laws?

Although we say that the market has a high risk, what is the real risk of the market? Is the risk that everyone can see a real risk?

Why is it not easy to lose money when a bear market enters the market? On the contrary, it is the bull market that enters the market, and in the end it is the result of losing money. However, most investors are willing to buy stocks in a bull market. This is like, the bear market put up a big sign, the stock market lost money, you see this brand will be willing to do stocks? There is a big pit ahead. With the sign, will you take the initiative to jump? When the real risk itself is clearly defined, the potential risk is reduced.

In turn, the bull market stock price appears a bubble away from the value, but the bull market presents investors with rising prices and rising returns. The sign posted in the bull market is high yield, and even now many rookie retail investors want to buy stocks as soon as they enter the market, hoping that they will rise by the daily limit tomorrow. When investors see excess returns, their potential risks continue to accumulate. The stock price has been further and further away from the value, because the ignorant trading behavior itself is the process of risk accumulation! When cognitive mismatch returns, this itself is a risk, but may not be a short-term outbreak, lengthening time, wealth and cognition are basically matched.

2. So let's talk about the common sense of risk

First of all, we must make a qualitative analysis of the risk.

The state of risk is different from different perspectives?

First, the perceived risk, and the real risk. In the perceptual state of investors, when will we perceive the risk? When can't you feel it?

Perceived risks, and real risks?

People are emotional animals, most of the time we understand each other's intentions through our own feelings, and most of the time we react based on human instincts. However, the stock market is an anti-instinctive, anti-human place.

For example, when I was young, the teacher would severely criticize me, and I would instinctively feel that my teacher had a bad attitude towards me, and I felt very uncomfortable. At this time, I felt negative emotions (risk aversion), but after adulthood, I used rational cognition to think and found the logical essence behind the teacher's criticism in order to correct my mistakes and make me grow up better.

There are many times, the two sides of things, we can not perceive at the same time, we can only use sensibility to perceive one side of things, and reason to understand the other side of things.

Recall their own study career, the course of business management, and slowly invest in the road, meet better people, they are all extremely sensitive (keen insight), but also have extremely rational cognition!

I often say to my colleagues that if you are far more emotional than rational, you may be too sensitive, and your reason cannot control your sensitivity, your emotions will expose risks. Conversely, if you are too rational and not sensitive enough, you will lack empathy to the world, ignore it and lack curiosity!

Only those who are full of sensibility and always use reason to monitor their sensibility can often really see the two sides of things!

When we go back to the stock market, what stocks always make us feel is price fluctuations, sometimes high and sometimes low. At this time, we must jump out and make a qualitative analysis of the price fluctuations in the market. Is the fluctuation of stocks perceptual or rational? is this really important? If we can't explain it clearly in terms of metacognition, we don't know whether we should believe that the price is rational and effective or perceptual random.

At this time, there will be a voice in the market, which should be dominated by the technical school, the price of the market reflects the fluctuation of stocks, and the market is always right!

There is another voice, the stock lengthens the cycle, its price curve fluctuates around value, and eventually returns to its value, so it is effective. But in the short term, stock prices are not particularly obedient, and Mr. Market is often too optimistic or too pessimistic!

Which view do you agree with that determines your investment values? Maybe this question can really identify what kind of investment perspective you are?

Some investors claim to be value school, but they often use the price to decide. When the stock goes up, it means that the stock is worth. This kind of logic, to prove the value they are talking about, to prove the value with the price, we must admit that the price is rational. Does this logic make sense?

The recent boom in the gem (talking about this is easy to cause controversy, gossiping about personal humble opinions).

There are three stages of stock market gains, first an increase in share prices as a result of improved performance, followed by liquidity premiums and finally risk appetite. Performance is the base of steel and concrete, which is relatively stable and reliable, and its mobility is like sand. Once the flood is washed through, it will be washed away. And emotions are like bubbles, which will burst and disappear as soon as the wind blows. Do investors know that the object we hold is steel and concrete? Or sand and gravel? Or is it a pile of bubbles? Whether we make money with price matching value, liquidity premium or emotional premium. If the nature is not clear, then as soon as the wind moves, the profit will be gone, and the principal may be lost as soon as the water flushes.

The price-to-earnings ratio of gem 50 has exceeded 100 times, with a historical extreme value of 140 times. The performance growth of gem 50 this year is significantly higher than that of Shanghai and Shenzhen 300. According to brokerage estimates, net profit growth can reach 60%, which may be one of the reasons to support long institutional funds. But the perception is the amplification of benefits, at the same time, we should also be aware that the real risks are constantly accumulating!

When the people with the least market risk awareness and cognitive ability hold the same stocks as you, do they really know the company they bought? do they understand the jungle laws of the stock market? Do they know what the valuation system is? If such people are full of dangerous jungles, perhaps ignorance itself is the greatest risk.

(due to personal business reasons, I have seen more investors in the primary market and secondary market, and the bosses of entrepreneurs and listed companies also communicate with each other from time to time and make very objective evaluations. their excellence lies in that rational thinking can control perceptual thinking very well, and perceptual sensitivity is still improving! This kind of thinking may not have an advantage for short-term entry into the market, but with the passage of time, the accumulation of experience and mental maturity, it is easier for them to enhance their cognition and objectively grasp the laws of the nature of things. I have always believed that objectivity, rationality and the thinking power of overall vision are the necessary qualities of excellent investors.

The stock market is a place where there is no threshold, perhaps many investors have different experiences or different growth processes, the key lies in whether to judge things from a perceptual perspective, or to understand with a more rational cognition. Personally, no matter what the educational background is, as long as we can respect rational cognition and objective common sense, it is possible to get out of the dark forest! All the trading results that do not recognize the essential law of investment are only short-term floating profits and losses and cannot be transformed into effective returns. )

3. Go back to the question of perceived risk and real risk

So when the stock price rises sharply, for example, to 5000 points, what we often perceive is the increase in earnings, joy and happiness! I feel the same way. At this time, the risk we perceive is very low, and the signal conveyed by the perceptual layer is, of course, the joy of appearance! And the real risk is accumulating to the extreme! The farther the market price deviates from the valuation, the greater the accumulated risk of overvaluation!

On the other hand, when stocks fall to more than 2000 points, profits drop sharply or even losses, what we feel is pessimism and disappointment! At this time, the word risk is vivid in my mind, and there is a bloody loss! But at the same time, the real risk of the market is released, when most investors see the pit clearly, often the pit itself is no longer a risk!

Perceptual perception is the apparent risk, rational perception is the real risk!

We should objectively admit that Mr. Market is not always rational, sometimes overly optimistic or pessimistic (related to the perceptual rational state of the participants in different stages of the market).

For example, at the bottom of the stock market, retail investors often do not pay much attention to the market, and the stock games are often professional investors and veteran investors, and their perceptual fluctuations are smaller and their rational cognition is stronger, when the general situation is not good. Rational emotions tend to be more pessimistic and cautious. At this time, the real risk of the market is often not high.

Conversely, at the top of the increment, immature retail investors often play an important role in pushing up stock prices, and the more urgent it is to beat the drum, the more urgent it is to give rational thinking time, often by instinct. At this time, rational traders are very uncomfortable and will gradually choose to withdraw from the market. The so-called bystanders are clear and those who are confused may be the state of the most exciting part of the stock market.

At this time, the perceived risk is not high, but the real risk is very large!

Conclusion, perceived risk and real risk, perceptual thinking and rational cognition!

SecondExplicit risk and recessive risk

The above problems are perceived state analysis and mental state analysis from the perspective of traders.

The problem now is to analyze the poor expectations from the information provided by the market itself.

The stock market game is not only the psychological game, but also the information game.

And psychological expectations, and information asymmetry, often produce poor expectations!

The explicit risk and implicit risk of information must be recognized by a more complex methodology.

Why is there such common sense that all the good is bad?

For example, what is the easiest thing for most investors to pay attention to, such as a financial statement or a brokerage report? Revenue growth, profit growth, return on equity, or agency rating, pe,pb valuation?

So the data that most people are concerned about. Often explicit information, there is a lot of information or unfalsified signals, often implicit information?

For example, the liquor industry, not the retail industry, is directly pushed to consumers, but is connected through the chain of channel merchants. Therefore, the explicit information is the growth of net profit, etc., but the implicit data are the expansion chain of channels, the accounts received in advance, the inventory of channels, and the sales data of channels!

Generally speaking, the overload account period of channel merchants is one quarter, so the profit of liquor enterprises lags behind the real reaction of the market by one quarter! For example, in this epidemic, the sales of channel merchants dropped sharply in the first quarter, and inventory was overstocked, but the financial growth data reflected in the financial statements of liquor enterprises was the confiscation of prepaid accounts affected by the epidemic in December and January.

It will only be reflected in the second quarter. Through hidden information, accounts received in advance, the decline in free cash flow, all reveal some hidden risks! Now that Maotai has a price-to-earnings ratio of more than 50 times earnings, can profit growth really match this valuation? As the interim report is approaching, what kind of answer will the market give?

Here we emphasize two pieces of common sense.

One, any industry has explicit information, and implicit information, we can not just know what everyone knows, this is often the risk of information. The good that everyone knows is often bad. However, there are often poor expectations of hidden information.

In the first half of the year, several stocks clearly showed poor expectations, but the industry of CITS, which was so heavily affected by the epidemic, has turned into Daniel stocks, and many people do not understand why. It will be all right when we understand why!

For example, at the current Shanghai airport, everyone knows that the airport business has been affected by the epidemic, passenger traffic has dropped sharply, and the performance is very poor, but the market has already priced fully at the worst time in the first and second quarters. The reason why it didn't hit the stock price badly. Because the big capital sees the future of Shanghai as a global financial center, the location advantage of Shanghai airport will constantly siphon the huge traffic of East Asia Free Trade area, and the value of scarce channel even exceeds the license plate of administrative monopoly. Therefore, behind the dominant information is often, need, pop out, high pattern, multi-dimensional, long-period, in-depth analysis of hidden information.

Therefore, in view of explicit risk and implicit risk, we need to take the cocoon seriously and find information that most people do not pay attention to or have a longer chain.

The other isExpectation differenceThe higher the expectation of the marketThe easier it is to make the best of it.!

Consumer stocks in May obviously, Yili shares, due to the initial high expectations, rose a lot at first. As a result, profits fell in a quarter, which did not meet expectations and smashed directly. Objectively speaking, is it really bad that profits are still growing positively during the epidemic? But there is something wrong with the poor expectations.

In July and August, we should know that the mid-reporting season is coming, will there be a large number of stocks with poor expectations?

Sometimes we often hear that the good is all bad, the regular performance is very good, and the stock price does fall, which is the process of realizing the expected difference. There was an article on poor expectations before, and we'll have a chance to talk about it later.

With regard to hidden information, there is also a logical chain signal method, which is difficult to study, and only institutional investors are good at grasping it. Take an example (this example has been given many times, this is the transmission of a typical information logic chain)

Thermal coal, how to observe signal transduction?

First, look at the year-on-year growth of total power generation.

Second, look at the change of the proportion of thermal power.

Third, look at the data of coal inventory in thermal power plants.

Fourth, look at the stock data of Qinhuangdao thermal coal.

Fifth, look at the transportation frequency of Da-Qin Railway.

Sixth, look at the inventory of Shanxi coal yard.

Seventh, look at the fluctuation of commodity futures prices.

Stock prices in the middle of different signal stages are likely to complete Jiancang, washing, pull up, often the final thermal coal prices rise. The stock price has reached the bubble stage, waiting for retail investors to take over!

Therefore, the longer the logical chain signal is, the higher the information asymmetry is and the greater the expectation difference is! Reaction to the market, often cyclical stocks, there are growth stocks easy to rise and fall, but consumer stocks Mingpai trend more!

But if consumer stocks with such a trend suddenly stand up, is the expectation gap a little too high?

Conclusion: the market is full of messy information, make a good qualitative analysis of explicit information and implicit information, and quantify expectations at the same time. It allows us to better control the explicit risk and the hidden risk!

Third, the risk of price fluctuations and the risk of permanent loss of principal

From the behavioral point of view, if the transaction of the selling behavior is not completed, the final trading closed loop will not be formed. All profits and losses have not been settled.

Therefore, it is more difficult to sell than to buy, because this is the final settlement behavior of the trading closed loop and plays a decisive role!

So let's take a look at this question. What are our trading principles? What is the anchor sold?

If you sell by feeling, then where does the feeling come from? The stock market itself is an extremely sensitive place, price volatility, good and bad news, a variety of technical forms. Will these affect perception? And then form irregular selling behavior?

Personally, it is very important to characterize your trading behavior. Is it selling rationally and justifiably, or feeling, through the principle of value or the price game?

Have you reviewed and summed up after the sale to test the rules of your selling behavior every time? is it regular or random?

If it is disorderly and unfounded to sell based on feeling, then whether it is profitable or not, I do not think it is a good trading behavior, and even profitable trading will often lead investors to a more wrong trading state. On the contrary, the result of loss can force us to reflect on ourselves!

If you form your own trading rules, what is the winning rate? Is it stable? These need to constantly evolve their trading behavior by constantly testing, reflecting, and revising trading rules.

Professional investors will certainly move from perceptual trading behavior to systematic and rational trading rules! This is the only way to success, even the only way!

And rationality, self-discipline, introspection, persistence and other excellent qualities are also necessary for success, contrary to human nature!

In order to avoid the risk that the risk of price volatility translates into permanent loss of principal, then I think that since the result of the sale is the stock price, the reason or anchor for selling should not be the price, but the value?

That's why I pulled myself out of the earliest technology speculation. Logically speaking, because of price fluctuations, as the basis of trading behavior, investors are easy to become "slaves" of the market (thinking is easy to be led by price, mood is easy to fluctuate, and sensibility is easy to triumph over reason. it is not conducive to identify the real risk or hidden risk of the market through rational cognition! )

Then jump out of the market price fluctuations, see clearly prices fluctuate up and down around the value, short-term prices are affected by the mood of capital news and deviate from the value a lot, but jump out of the daily minute line and go to the weekly monthly line, we will find that the mood of chasing the rise and fall every day within two weeks will ebb, the risk of information asymmetry in one or two months will be exposed, and funds will follow the performance growth of the enterprise for a long time to push up the total market value.

In the end, the long-term price will return to the value itself, and the mean return is a common sense rule!

Therefore, there are several requirements to avoid the risk of price fluctuations.

First, value is the anchor of trading behavior, not price. The price is the table, the value is the book!

Second, admit that short-term price fluctuations are disturbed by a variety of factors, which are very difficult to grasp (a small number of people can do well, have time, talent, and trading system), while long-term prices will return to value itself in the way of mean regression. Believe in the power of mean regression.

Third, to add the latitude of time to their own capital, many people pay too much attention to the return of price fluctuations, rather than to accompany time and earn the return of time. First of all, it should be clear that the element of time is the most important, and speculation pays more attention to volatility. Why can we buy financial management for a year, but not investment? If you filter out the factors of price fluctuations, the annualized income of the high-quality companies of the SSE 50 is much higher than that of financial management. And good companies are clear brands are not difficult to determine, volatility will be much smaller, is it really difficult to find? Maybe I don't want to have it.

Of course, since we have come to invest, we all want to make money with fluctuating prices. Then the strategy is clear. The money to earn time should be to keep the bottom, and the money to earn price fluctuations can be to reach the top! First of all, to ensure that the principal does not lose money, keep the bottom, and then through the correct cognition to improve the trading system to the top! Ask yourself if you don't have a good bottom and just want to get to the top when you go into the casino. Keeping to the bottom before reaching the top is the mature trader)

Give a fixed amount of time, most of the money we earn is time money, as well as a small part of the price fluctuation money!

There is a saying in the investment, I am afraid when others are greedy, and I am greedy when others are afraid. This sentence sounds easy, but it is difficult to do.

First of all, how do we know what other people think?

Secondly, how to quantify the extremes of fear and greed

Therefore, this sentence is a common sense and is indeed useless. We need to jump out and quantify this sentence.

The extreme value of others and greed and fear, quantify these two keywords into data!

For example, who is someone else? Through trading volume, incremental capital channels (public offerings, savings move, financing data) can capture the shadow of others? Through careful verification of multiple data, maybe we can find a lot of rules?

If you look at the extreme value of fear and greed, there is also a lot of data, such as the price-to-book ratio of Shanghai and Shenzhen 300, the dividend ratio of high-quality companies, the buyback of good companies, AH premium data, industry-wide valuation quantiles, breakage rate, and emotional excitement index. Wait, a lot of data signals are used as the basis for judgment!

And these are rational cognition, not perceptual emotion!

When we make the final transaction, ask ourselves whether there is still a lot of common sense that we don't understand, whether we still trade on the basis of price fluctuations, whether biased fear dominates the transaction, and whether it is supported by rational and objective trading rules.

There are two different bridges between the risk of price fluctuation and the risk of permanent loss of principal, one is cognition, the other is emotion. Depending on whether your transaction is successful or not, the return result can only explain part of it. The key depends on which bridge you came from.

4. Summary

The stock market is not a cash machine, nor is the stock market a lottery machine! The stock market should be a high-risk and high-return equity market (from the perspective of investment)

So awareness of high risk should be crucial!

First, the perceived risk, and the real risk. See the essence through the phenomenon!

Second, explicit risk and recessive risk. Through a more subtle magnifying glass and a longer logic chain signal, we can find the signal of hidden information, find the law of poor expectation, and really see the hidden risk!

Third, the risk of price fluctuations, and the risk of permanent loss of principal! Controlling trading behavior and choosing the bridge of rational understanding of trading rules may avoid the risk of permanent loss of principal due to the risk of price fluctuations!

Fourth, in a bull market, you see gains and ignore potential risks. In a bear market, you see risks and ignore potential benefits! The high volatility of the market represents crowded trading and emotional premiums, when most transactions are overbought. Low volatility means that the value of the stock is not reflected in the price, or even substantially undervalued, so selling at this time is a good opportunity to pick up bargains!

Edit / Jeffy