- Do a good job in asset allocation and pursue strategic correctness
Asset allocation is the foundation of investing and determines the vast majority of our income. Most of the time, it doesn’t matter which stock we buy. What matters is how many assets we allocate in which direction.
How to allocate assets? In a word, asset allocation cross-variety (such as stocks, real estate and bonds) and cross-market (such as A shares, Hong Kong stocks and US stocks), the core is to maintain a reasonable proportion of assets, and to carry out dynamic balance. The most famous is the 50:50 equity-debt balance strategy (half equity and half debt, which can be dynamically balanced on a regular basis, or the position ratio can be maintained according to the degree of deviation).
When building an asset allocation model, a strategic direction is established, which requires finding the right tools. Index funds are a great asset allocation tool with low operating costs, transparency and controllable strategies.
For example, if you are bullish on Hong Kong stocks, you can consolidate and allocate some Hong Kong stock index funds . Both the large-cap index and the small-cap index are configured. You should be able to outperform more than 90% of market participants in the past year.
It is enough to make a good asset allocation plan, establish a strategic direction, choose the right tools, buy and hold, it is that simple.
- Mainly index funds , supplemented by active funds
I have always preferred index funds, because the rules of index funds are transparent, simple and clear, and it is very easy to locate assets. Graded funds , GF long-short leveraged funds , and index-enhanced funds are essentially index funds.
A trend in the fund industry now is that active funds become passive and passive funds become active. In fact, it breaks the absolute boundaries between index funds and active funds. The prime example is the index-enhanced funds I’ve mentioned many times, which also give investors like me more options.
- Active funds must choose the most trustworthy people
This is mentioned separately here because many small white investors I meet know nothing about their fund managers . A veteran fund investor once told me that he held a fund for a long time, and he understood the fund manager far better than his colleagues at the same table. When you have a good understanding of a fund manager’s investment style and past performance, you should be able to avoid many pitfalls.
Another example, Templeton, a contrarian investor, was very optimistic about the Korean stock market in late 1997, but he did not know enough about the Korean stock market. He chose a public fund to invest in. The fund performed very poorly in 1997. the reason is simple. The Korean market was so bad that year. Templeton’s detailed investigation found that the fund’s fund manager was highly consistent with his own philosophy, so he invested firmly and earned 267% in two years.
The Internet has provided us with a lot of convenience in understanding fund managers. The fund company ‘s promotional materials, various third-party data, media reports and information are readily available. It depends on how well you do your homework.
- Establish a strategic bottom position and use cash flow to make fixed investment
For the targets I am optimistic about, I tend to buy the full position at one time and leave no regrets for myself. Because the market is highly efficient, the period of absolute underestimation is always short-lived. When the sky is raining, you must use a pot to pick it up, otherwise the later regrets will not be added. I have many lessons that I am optimistic but buy too little. For good investment opportunities, the biggest risk is stepping out.
What if the bottom position of the strategy continues to fall? My choice is that if the previous investment logic has not changed, I will continue to hold firmly, and I will make a fixed investment with cash flow according to the trading plan.
Is it better to make fixed investments with cash flow based on index declines or time? This should vary from person to person. For me, in order to hit my favorite price target, I certainly buy when I have the money.