Looking at the valuation to buy a fund, the most fearful thing is to kill the logic

Straight to the point, any investment framework has certain deficiencies, and it is difficult but not impossible to make up for deficiencies in practice.

Look at the valuation to buy the fund

Buying funds based on valuation is actually a popular investment concept in recent years. This method is relatively simple and easy to understand, and it is easy for investors to accept.

Under the guidance of this concept, the main investment object is index funds, and the reference for operation is the valuation level of the index, selling overvalued and buying undervalued.

It seems that the data is very clear, and it is easy to refer to and implement. Relatively speaking, the analysis of active equity funds is always somewhat metaphysical and subjective, which is not easy for investors to accept, and because of the added subjective color, once the performance of the fund is not good. Well, people who say it’s good are easy to blame, and index funds are different. The blame is that the market is too extreme.

This method is popular, but it has not brought good returns to investors in recent years. First, because the excess return of active equity funds is more obvious, it loses in investment; second, it depends on the valuation from time to time. Value traps, several big pits in recent years, such as environmental protection, media, banking, securities, real estate, Hong Kong stocks, and China Concepts, might as well be.

The most feared is killing logic

In fact, returning to the above big pit, it is still easy to find that the most afraid of “killing logic” when buying funds based on valuation.

Taking historical valuations as a reference is actually setting an interval, and the premise of this interval is a relatively stable environment . If the environment changes, then this interval will definitely be difficult to maintain.

Take a bank as an example. Thinking back to the glory days of banking, young people were proud to join the bank. At that time, the performance of the bank grew rapidly and the valuation level was high. Now, the overall growth rate of this industry is relatively low. , valuation levels have also dropped significantly, even lower than utility stocks. Because of what? Because the development stage of the industry has reached a mature stage, the growth rate cannot be increased. The logic of the entire industry has changed. It may have been a growth stock in the past, and it may gradually become a value stock. Now some may be junk stocks.

The logic of Zhonggai has also changed, but there may be a turning point in the future. The industry has not yet reached the stage of maturity, but it encounters some external factors and there are indeed more twists and turns.

Or go back to the interval, this interval is valid, it must be that the big environment has not changed much. If the big environment is turned upside down, it is not advisable to still be here to seek swords.

fill this loop

In fact, various investment frameworks have shortcomings. Nothing is perfect, and in practice, we can only try our best to make up for it . Of course, the premise is to recognize the deficiencies. If you don’t even recognize the deficiencies, you can’t have the awareness to make up for it.

Looking at valuation investment, the most fearful thing is to encounter a valuation trap, that is, the overall downward movement of the valuation level, and this downward movement is actually caused by a major change in the logic of the industry/theme, so you must be extra careful with this logic. one ring. In fact, now is not the worst time for investment bank stocks. The worst is actually after the end of the 15-year bull market. That time happened to be the point of valuation switching.

There are other investment methods, all of which have shortcomings. Many people use the same method, and the final income varies. The main reason is that the master’s remedial ability is stronger, and the pitfalls are less. This is ability and it is strength.

@Today’s topic # #Fund creator incentive plan#

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