Author ｜ People and God
Head image ｜ Visual China
1. Logic A and Logic B
Buffett said he was 89 years old and had never seen such a market.
I analyzed the impact of the epidemic situation (no one was serious at the time) on the market when I started the car on January 21st, saying:
Everyone underestimated the impact before the epidemic was made public. After the epidemic was made public, everyone overestimated the impact.
This judgment is what has happened in A shares and is also happening in global stock markets.
How do you understand this sentence? The external market is suddenly profitable, and the market will always switch between logic A and logic B:
Logic A: If it is a part that everyone knows, it means that it has affected the market, but it is not important;
Logic B: The things that really matter are things that have n’t happened, are about to happen, or do n’t know what has happened
The most classic example is that the lowest point of the British stock market during World War II occurred in the Great Retreat of Dunkirk in 1940, and it began to rebound during the London bombing. A new low is very simple. With the United States participating in the war, victory is doomed, and the question is how long it will take.
The U.S. stock market bottomed out in 1942 because the auditorium was sitting well, and suddenly the Japanese were dragged onto the stage of the war.
I have talked about the four issues of the “industry chain series”, and today I want to return to trading-investors in the face of the plunge of the eternal soul three questions: should I lighten up? Would you like to pick up a flying knife? What to do when a warehouse is full?
Additionally: The operations in the plunge discussed in this article refer to what to do when a plunge has occurred in the market, and it does not include that you foresee that the market is going to fall and you should not sell. The former is a problem of operation, a matter of right and wrong; the latter is a problem of the investment system, and it does not matter whether it is right or wrong.
2. What is a good deal?
But before we analyze, we must first clarify a concept: what is a good deal?
Most people think that this problem is not simple. Making money is right, losing money is wrong.
But this is not the case. On the one hand, the profit and loss results of a trading decision are related to many factors; on the other hand, if it is not extended to a certain time, you can not even judge whether the decision is a loss or a profit.
In fact, the investment level of most retail investors cannot be improved. One of the important reasons is that there is no correct way to evaluate trading decisions, there is no progress without feedback, and trading experience cannot be converted into trading experience.
The real and reasonable evaluation method is “determining the long-term stable profit level with a long-term trading strategy”, and the single transaction decision should be consistent with the long-term trading strategy.
For example, we know that a long-term and reasonable diet structure leads to a reasonable level of health. We only need to eat healthy food every time. We do n’t have to observe the physical response after each time.
Value investment is just such a long-term stable and profitable trading strategy. There are basic principles. Each transaction can be judged in advance and evaluated afterwards, so it can become the mainstream investment method in the world.
What exactly is a trading strategy for value investing?
There are two main sources of the concept of value investing. One is Graham’s “Mr. Market” theory. “Mr. Market” is emotionally unstable when he gives a significantly lower or higher than When the market price is reasonable, we should accept the transaction.
The second source is Buffett’s “growth stock theory”. They believe that companies with a “moat” that can grow steadily for a long time can be bought at a reasonable price; even if they rise A bit more, but the valuationThe level can be made up by long-term stable growth, or it can be held.
These two theoretical sources determine that the purchase of value investment requires two basic conditions:
1) The logic of long-term growth
2) Below a reasonable value and with a certain margin of safety
Simplified into the “two principles of buying” value investment: the logic is established, the price is cheap.
It corresponds to the “Three Principles of Selling”: the logic has changed, the price is too expensive, and there are better options.
So to evaluate the gains and losses of a transaction, you only need to determine whether it meets the conditions for buying and selling. Buying must have both conditions and selling needs to have one of the three conditions, not to see profit or loss. It’s that simple.
So, the three questions of the plunging soul, value investors all have standard answers.
3. Question 1: Should I sell it?
Many people do n’t sell because of the plunge, but because of the plunge and feel that the market outlook is going to fall before they sell.
It is human to feel fear in a plunge, but it is also irrational. For example, it is like many people are on the top of a mountain and do not feel scared, but blindfolded, and the lower the more, the more acceleration Too big to be afraid.
The best way to overcome fear is to return to the “Three Principles of Value Investment Selling”: the logic has changed, the price is too expensive, and it is found to be better.
The logic has changed, it is a correction of the wrong buy; the price is too high, it is a judgment on the value of the company; what is found better is the comparison between different companies, which is actually a share swap, not a simple one Sell, let’s talk last.
There is no principle that lets you sell and sell in a slump, so a slump cannot be a reason to sell.
The second reason why you ca n’t sell in a tumble is that unless you own an index, you have to decide which stock to sell. This actually increased the decision once more, increased the complexity of the decision, the accuracy rate was even lower, and the stock market plummeted and the stocks did not fall. After that, it was very common.
Here is the most critical issue. As a value investor, we judge the value of individual stocks from the beginning to the end, not the rise and fall of the entire market, so we cannot use the judgment of the rise and fall of the market to direct. Our operation of individual stocks is like if you want to eat eggs, you can’t buy ready-made ones in the market, but you buy an old hen to go home and raise eggs every day.
So we can’t sell stocks just to avoid the plunge.
Buffett held a lot of cash last year. Not because he thinks that US stocks are going to fall, but the second reason to sell is “too expensive”. In fact, this time, like the financial crisis in 2008, he shot down and seriously damaged aviation stocks.
The other short-selling Dario is a large asset allocation and hedging, with both long and short positions, this is another set of play different from value investment.
So the answer to the first question is no.
The only exception is that you use leverage, and there is no fund to cover the position, and there is a risk of being closed. The only thing you need to do here is to lower the leverage during the collective auction. There should be no luck.
4. Question 2: Would you like to buy it?
There is a saying, “Can’t pick up the flying knife”, because you don’t know how long the “flying knife” will fall.
This is a typical right-hand deal, but it clearly deviates from the theory of value investing.
Recall the two principles of buying: logic holds, and prices are cheap.
The business logic of a company is generally stable. The basic method of all value investment is to find a company with long-term growth logic, set a price below a reasonable value and have a certain margin of safety, and then wait for prey slowly. Close.
In general, the overall market decline will not change the logic of individual stocks, and the overall decline brings cheaper prices, which is why we should buy in a plunge, < / strong> As for whether there are lower prices later, this is not something that value investors need to consider.
So, value investors are typically left-hand traders.
But it needs to be emphasized that Buying in a plunge is not a dip or amortization of costs. Bottom is a big betBottom of the plate, the amortized cost is even more “anchored” by the last purchase price, which does not meet the “two principles of buying”, it is easy for you to waste valuable opportunities.
So the answer to the second question is also clear. In principle, you should buy it, but the specific operation must weigh the following three questions:
First, we need to measure our ability to withstand floating losses. We only buy at a certain level below a reasonable value. This is the margin of safety.
During the plunge, the overall risk appetite of the market is reduced, and extreme low prices are possible, so the margin of safety should also be slightly reduced. But the safety margin is set in advance, and it still has a clear price, rather than a lower price after the decline.
Second, we need to measure our true investment level to determine the highest position standard. Because the judgment may be wrong, the best way is to buy in the highest position, and the highest position depends on your investment level, not your judgment on the market outlook.
Third, what should I do if I have no money in a warehouse?
In addition, the overall decline has made almost all stocks cheaper, so who should I buy?
Actually, these two are the same question, which is the third question. What do you buy?
5. Question 3: What should I do or buy?
Thursday night, a friend on Knowledge Planet asked to buy during a plunge. It is better to buy a flexible target or a deterministic target.
This is a great question. It can test our understanding of stocks.
A target with a large elasticity means that there is a lot of room for upwards and downwards; a target with a high degree of certainty is usually fully priced and is not prone to fluctuations.
Buy the deterministic target during the plunge. The reason is that I have analyzed it in detail in “The Best Three Types of Buying Opportunities for White Horse Stocks, Only Once or Two a Year.” But Buying an Elastic Target is definitely a rebound strength Bigger.
What exactly do you choose? We must understand the mentality of investors holding different targets during the plunge.
The biggest benefit brought by the plunge is cheapness. The biggest problem is that the trend goes bad, which will lead to continuous declines. The difference in the structure of these two types of stock investors brings different trend characteristics.
Highly flexible targets, Because there is a lot of up and down space, it will enter a lot of speculative funds. This type of funds may not be very optimistic about the company, so it has a strong sense of risk. Only enter the market when the market is very stable. If the market is turbulent, the market will flee, so the stock price will fluctuate sharply.
Deterministic targets, usually the upward trend of performance is more obvious, usually they are relatively priced, not easy to fluctuate, and will deposit a portion of “dead faithful powder” over time. Regarding the broader market Ups and downs, stick to the chip, and will cover positions if it falls more, we call it “good chip locking.”
We can think of these two types of stocks as students in two classes. Students in the “flexible target class” are very active and undisciplined. If there is an artificial rumor earthquake, they must be surging out of the classroom together, and it is easy to trample. ; “Deterministic target class” students are very disciplined and do not run around. If there is an artificial rumor earthquake, except for a few mixed in, most students can remain calm.
The plunge is that the market is experiencing extreme emotions and pricing fluctuations. The “elastic target” is re-pricing. It is possible to fall as much as possible, while the “deterministic target” drop is to wash away the entrenched elements.
After each plunge of “deterministic target”, the stability of the chip will become better. Even if the trend of the market reverses, it will not fall too deeply. Therefore, blue chips have buying value only during the plunge.
During the plunge, except for a few deterministic targets, most stocks are really falling knives and cannot be accessed.
In general, there will be a period of rise before the plunge. If it rises for a period of time, those stocks with high certainty will often rise without having time to buy. Many people may have a certain number of certain supplementary varieties. During the plunge, the timing of the general deterministic product in the right hand is replaced by a stock with a high degree of certainty and a good chip lock.
So the problem of full positions is also solved: Selling during a plunge is the best strategy, not moving is the medium strategy, and stock exchange is the best strategy.
6. Why not guess the index?
Most investors started their stock trading career with small funds of tens of thousands of yuan. The amount of funds is small, it is difficult to form a system, and they occupy less family assets. The short-term speculative mentality is serious, and they have developed the habit of guessing the timing of the index.
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