Is the “4% fixed investment method” that is popular on the Internet really powerful?

#Medicine Fund is approaching the bottom of its valuation, has the opportunity for fixed investment come? #Recent market volatility has intensified again, A-shares have also started a 3,100-point tug of war, fund companies have also begun to roll in, and they have launched scheduled investment activities, and even pulled out their own fund managers’ scheduled investment deduction records to show the list.

No, when I was visiting Station B some time ago, I saw a blogger who was known as “Graduate from a famous school with a master’s degree and a senior researcher” shared the “Advanced Version of Fixed Investment Strategy – 4% Fixed Investment Method”.

I watched this video carefully and repeatedly, and understood that its core is “only buy down, not up” , if it is only a slight fluctuation in place, it will not trigger a position increase, and the purpose is also very clear, that is to try to reduce the purchase price. cost.

The playback volume of this video at station B has reached 28.6W!

When I read the introduction of the 4% fixed investment method, my first reaction was:

“Good idea! Why didn’t I think of it?”

“Can’t wait to try it out!”

So, I immediately started the “Strategic Data Backtesting” project, and invited Chengdu Xichou Technology to provide me with data support to verify whether the “4% fixed investment method” is really so good.

If the effect is really good, I will definitely recommend it to everyone for the first time.

So after many times of communication and analysis with the Xitiao team, we finally got a disappointing result: “The 4% fixed investment method can’t outperform the ordinary fixed investment!”

Is it: Buying down and not buying up, can’t reduce costs?

At the end of this article, I will answer this question.

Then, the article will explain the content in turn:

① The rules of the 4% fixed investment strategy

②Data conclusion after back-testing 148 excellent funds

③Analyze the reasons why “buy down but not up” can’t outperform ordinary fixed votes

④How to make a better investment

Let’s first take a look at the specific strategy of “4% fixed investment method”

The 4% fixed investment method has a total of 3 links:

1. Position building period: Divide the investable funds into 10 equal shares, and invest one at a time;

2. Investment period: Every time from the previous “lowest point”, when the “new low point” is reached after the decline reaches 4%, 1 share will be invested. As you can see in the chart below, assuming the last low you bought was at A, then later, you should buy at points B and F, not point D (this is critical!)

3. The big rise is out of the cost period: Suppose the bull market suddenly comes, and the unilateral rise starts:

① When it does not rise to 15% of the cost, the base will remain unchanged and will not be invested;

② When the net value rises to 15% above the average cost, enter the take profit observation range, and then sell the take profit after the retracement from the highest point reaches 4%. And after a 4% drop, a new period of regular investment was opened.

The above is the specific method explained in the video.

The video also explains why it is “4%” -because from the historical data of a large number of funds, especially excellent funds, usually fall at most 30% and it is almost the end. In extreme cases, it can drop to 40%, but this has happened very rarely in history. So, divide the funds into 10 shares. Even if you start a fixed investment at a high level, you will invest one for every 4% drop. When all 10 shares are invested, it means that the fund has fallen by 40%, which is also at the bottom range.

How about it? After reading it, is it the first feeling that you feel: It’s really good! Makes sense!

So, let’s take a look at the real backtest data.

Data conclusion after backtesting 148 excellent funds

1. First determine the fund sample for this backtest

①The fund has been established for 5 years, and the annualized rate of return in the past 5 years is ≥18%;

②The top 20% of the fund company’s non-stock scale

A total of 148 long cattle bases were screened, and the strategy started in January 2018 and ended in early 2022.

2. The following is the conclusion of the backtest data

The time period of the backtest is from January 2018 to December 2021, crossing the bulls and bears.

For a more comprehensive validation strategy, we not only back-tested 4% of video recommendations, but also back-tested 3% and 5% at the same time.

Backtesting source data by Xichou Technology Data sorting by Fan Fan

Let’s first look at the “smile curve” market from 2018 to 2019: an average of 138 funds have triggered a decline and fixed investment. Although the return rate of “every period” (before it starts to take profit) is 17%, it is not bad, but the largest The problem is that the “fixed investment and deduction interval” is too long, and it takes an average of 2 months to make a fixed investment. This leads to the problem that the “investment amount” is too low, and eventually it ends up with a small profit amount and not much money. This also shows that excellent equity funds may not fluctuate daily, but it is not easy to make new lows! So, overall it is relatively stable.

Let’s look at the bull market from 2020 to 2021: The biggest problem is that the number of funds that “trigger fixed investment deductions” is quite small! Even if a 3% fall deduction rate is set, only 28 funds can be deducted. (We have 148 backtested funds) That is to say, for the vast majority of funds, if they adopt the fixed investment method of “buying a sum when they fall to a new low”, they will completely miss the entire bull market, and they will not even be able to drink soup. .

In order to show you the strategy more vividly, I specially found $China-Europe Medical and Health Hybrid A(F003095)$ to show you the details.

The first thing I paid attention to was “Phase 2”. During the period from June 2018 to April 2019, under the smiling curve that first fell and then rose, the fund itself rose -5.9% during the period, and the rate of return of this fixed investment strategy was 13.8% !

However, I compared the “ordinary monthly fixed investment” of China-Europe medical and health care mix in the same period:

Let’s look at the yield first: the fixed investment strategy has no obvious advantage, only an increase of 3.8%;

Look at the amount of income: the difference between the two is even smaller. The most important thing is that ordinary fixed investment is quite simple to operate, saving time and effort.

So, it’s better to simply make a regular vote.

Analyze the reasons why the “4% fixed investment method” cannot outperform the “ordinary fixed investment”

After reading the data, I fell into deep thought: Why can’t this “4% drop method”, which seems to make more money, outperform ordinary fixed bets?

Today I finally figured it out. Take the above “China-Europe medical and health mix” as an example:

The 4% fixed investment method is “buy down and not up”. From the high fund net value of 1.46 yuan in June 2018, every time it falls below a new low of 4%, one buys one, until the bottom net value is 1.016 yuan to end the purchase, and then keep holding. There is waiting to rise.

The average fixed investment cost during the period is 1.26 yuan, which is the position of the horizontal line in the following figure:

The problem is here: the “recovery interval” in the red box in the above picture, if you continue to make a fixed investment, you can continue to reduce the cost! Regular betting wins here.

Therefore, this is why the seemingly lower cost of “only buying down and not up” is not as low as the cost of mindless fixed investment during the entire “smile curve” period.

I don’t know if you have noticed that whether you decide to vote when the left side falls or when the right side picks up, the cost is almost the same!

So, here comes the question?

In the end how to vote better?

Since the cost of “settling on the left side” and “settling on the right side” is the same, why don’t we wait for the bottom to fall to the bottom range, or even start to pick up, and then slowly set the investment?

Why do institutions and media oppose the behavior of “waiting for recovery before starting to increase positions”?

This question is actually the question raised at the beginning of the article: Buying down and not buying up, can’t reduce costs?

Let me say the conclusion first: “The left side will fall and set to vote” is definitely better than “the right side will pick up and set to vote”!

Reason 1: The left-side fixed investment can better set the selling strategy, while the right-side fixed investment is easy to keep buying from the top, and it is difficult to take profit in time.

Usually, when we don’t make a fixed investment when it falls on the left side, and when the fixed investment reaches the bottom range, there is a high probability that the “bullet” has been fired, and during the subsequent recovery period, there is very little money that can be invested (passive control of the amount of funds chasing high). Then, when the net value of the fund rises back to the same as the fixed investment cost, it can be sold layer by layer.

However, if you start to invest on the right side only after the recovery, especially when you see that the fund has been rising, and then look at how much cash you have left in your hand, the first reaction is “if you don’t invest again, you will miss the opportunity.” The more expensive it is to buy, the easier it is to get ahead, thus ignoring the profit, and finally stand guard at a high position.

Reason 2: The left side starts the fixed investment, and there are more fixed investment strategies to choose from.
For example, under the premise that your time and energy allow, you can do the band operation of “set investment on the left, take profit on the right” in each small smile curve;

You can also use the “inverted triangle” method of adding positions, the more you fall, the more you buy…

I think the ideal fixed investment strategy is to start in the “stable period” after the “slump”, buy more as it falls, and then continue to make fixed investment after the recovery, until “the fixed investment cost = the net value of the fund”, you should start paying attention and be conservative. Clients of , can gradually sell at rallies to take profit layer by layer.

In short, start planning to vote on the left, and you will have many choices. However, once it starts to recover, it is easy to be affected by the rise, resulting in irrational operations.

The last thing I want to say is that although the 4% fixed investment method of Internet big V is not as good as advertised in the video, this idea of ​​”minimizing costs as much as possible” is definitely right!

Therefore , the consequence of blindly pursuing the “minimum purchase cost” is that you can’t invest a few times a year, and the principal invested is less, so even if the rate of return is higher, the final amount of income will be very low. Especially in the bull market, it is very likely to be completely “absent” and completely miss a wave of the market!

So, ah, the road is simple, for us ordinary investors, there may not be much need to spend time and effort to do some “scheduled investment”. It’s great to set up a regular fixed investment honestly, formulate a “win-only goal and a plan to reduce positions”, and stick to it.

@雪ball fund @today’s topic @snowball creator center $ Shanghai Index (SH000001)$ $ ChiNext Index (SZ399006)$ #Today’s topic#

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