(one)
In 2013-14, I made a hypothesis:
If a stock has been in the doldrums for nine years and its price is much lower than its value, by the tenth year, its value will return, it will not rise or even fall sharply in the first nine years, and the stock will rise sharply in the tenth year.
Will this happen? The answer is possible, but for the average investor, for the nine years you hold it, you will constantly wonder if you are wrong.
But in the past two years, I think there is an investment dilemma that is even more frightening: you are right. But the economy is changing, policies are changing, companies are changing, and what you were originally right will become wrong over time. The value of the company in the first nine years is the same as you calculated at the time, but by the tenth year, the value of the company has changed. . .
(two)
Therefore, when investing, we generally buy 1 yuan for 50 cents.
The company you originally held was worth 10 yuan, and you bought it at 5 yuan. What you’re thinking is that if you see it wrong, or the company goes bad, that way, you can have a margin of safety. For example, after a few years, the value of the company unfortunately did not increase, but instead changed from 10 yuan to 6 yuan, and your 5 yuan still has a return.
But in fact, the value of the company has changed from 10 yuan to 6 yuan, and the price of the stock may have changed from 5 yuan to 2 yuan. Because of this discount, it is entirely possible to change from 50 percent to 40 percent. Even many H-shares with A-shares have experienced such crazy discounts in recent years.
(three)
As a small person, you can’t get to know the management deeply and know their character ability. You don’t even know, maybe tomorrow, the management you think is very good will be replaced. Of course, to make things even more troubling, there are times when you don’t just ask a question about the needs of the current management, you don’t just have to pray that the next management will behave ok. You also need to be mindful of the risks you’ve taken on, or even the risks that you might have left behind. Because the previous two, three, five or six years of the company, the statements and all the media reports were inaccurate.
This means that all companies can be bombs.
(Four)
So, what about buying index funds?
The Hang Seng Index, the Shanghai Composite Index, is only half of what it was 15 years ago!
There are three reasons, the sequelae of the crazy bull market; the setting of the index has huge loopholes, which have been fully exploited and used by various institutions to inject water; the current economy is extremely poor.
Our original expectation was that residents’ income would double in 10 years. But what about these three years? A normal and reasonable expectation is that GDP will continue to grow rapidly for about 15 years after the per capita GDP reaches 10,000 US dollars. But what about these three years? The bigger question is, what about the future?
(five)
Although it is possible that it will not rise for nine years and return in the tenth year;
Although there may be a reduction in value, the price falls more;
Although it may be the company in hand, the bomb was dropped.
But investing, I can only choose to be optimistic;
I can only choose high probability.
Of course, in order to prevent small-probability events from happening, I also have to prudently allocate assets. In extremely risky investments like stocks, I can still live a good life even if I encounter small-probability events.
(six)
My current estimate is:
If the market value of the stock account is now cut in half, I can still live the same life as before.
And if it doubles, then, I can live another life.
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