There are two main types of investors in the stock market. One is short-term investors, who aim to gain short-term price differences by trading; the other is long-term investors, who use shareholder thinking to make money for the long-term growth of the company.
As the saying goes, “Ass decides the head”, short-term traders believe that the strong will stay strong, and they can make money by chasing up in the rising trend; while long-term investors like to buy corporate equity at a lower cost, the more the stock market falls, the better the buying opportunity. Well, the more you can fight for a greater profit margin for long-term holding.
And I belong to the latter, almost all the surplus money and spare money generated by running a business, buy equity funds on dips, and gradually transition from earning active income to earning passive income.
Since the stock market fell sharply in March, April and September this year, not only did I not have the slightest anxiety, but I felt an inexplicable excitement, because I could buy some chips at a lower cost.
I communicate frequently with netizens at ordinary times. More long-term investors are sad, anxious and even unable to bear it when the stock market falls sharply. I hope I can share some of my experiences or insights that I can be “light and clear” when the stock market falls.
I think all the “trouble” comes from not having an investment plan, or at least not thinking enough.
First of all, the most important point of long-term investment is to use “spare money”. “Leisure” means that we can’t use it for five or even ten or twenty years. If we don’t use this money, it will not affect our quality of life. Even if there is an emergency, we don’t need to use it.
Secondly, long-term investment must have continuous cash flow, so that when the stock market falls sharply, there will always be money to increase positions, even if the money is not a lot, but continuous bargain-hunting and increasing positions will bring us a good investment experience . Our investment planning should prepare for cash flow disruptions in advance. For example, once we retire or go out of business, our investments should have more conservative plans.
More importantly and urgently, when the market is extremely pessimistic, we need to do a good job in psychological construction.
When the market plummets, negative news and pessimism will be magnified infinitely. Many people worry that our investment will be lost. Therefore, not only do they dare not increase their positions, but they choose to cut flesh to decompress when the market is most pessimistic, losing precious chips.
Throughout history, China and foreign countries, all economies are in an infinite cycle of “good” and “bad” cycles, just like people’s day and night. Each cycle is actually a self-healing and re-development process of the economy. Ordinary “bad” is an economic recession, serious “bad” may be an economic crisis. The history of my country’s market economy is not long enough. During the previous economic crises in the West, especially the United States, there may have been dangers, but they have ushered in rapid economic recovery and growth since then.
Therefore, when economic expectations are at their worst and the stock market is at their most pessimistic, it happens to be a good time for rational long-term investors to open positions. There is no doubt about that.
There are also investors who are worried that the squeeze from the periphery will affect our economic development, and even worry about war.
We have a stable political situation, the most complete industrial system in the world, a huge domestic demand market, and citizens who are tirelessly pursuing a better life. Everything since 2018 shows that we are extremely resilient and competitive, and I have full confidence in the future.
At the same time, various levels of “trouble” are bound to come one after another, and we need to treat them with a sense of common sense, without being overly concerned.
As for war, the probability of occurrence is very small, and there is no need to worry about it. To put it 10,000 steps back, even if there is a war, I will choose to continue to hold it, and if conditions permit, I will choose an opportunity to increase the position when it is extremely pessimistic. Because a small war has little impact on the economy, and a big war is a matter of life and death, in fact, investing is no different from not investing, so I will choose to invest.
In the worst case, I can still insist on holding it. I have figured out this problem. In fact, investment is not that complicated. I will buy on dips when I have spare money, and do dynamic take-profit or rebalancing every one to two years. As for the ups and downs, if we don’t care about it, it will not cause any fluctuations and discomfort in the mind.
Although the road is long, it will come. The same goes for long-term investing.
All the opinions and funds involved in this article do not constitute investment advice, but are only a true record of my own thinking and practice. I invest in the market based on this, at my own risk.
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