How do you adjust your investment mentality under market fluctuation?

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Big Bear City is the best chance to change your life

The market falls and falls, when exactly?

Why does it feel so bad after the market falls?

The most mooer associations that invest in Hong Kong stocks and midstream stocks in these two years:In a wave of more than 70% of the downline, every judgment and action that has come to the bottom is constantly slammed.。

Source: Futu Cattle

Particularly affected is the mindset: the lower the stock price, the more fear takes over our brains, and the more we have from past falls, the more bearish we make us want to sell.

But the choice“Sold Out”, Is it really the best choice during the stock market's low tide?

Why is bear market a good opportunity to make money?

Smile when you read the headline “Investors lose as the market falls.” In your mind, edit it to “When the market falls, the retrencher loses — but the investor gains.” —— Buffet

Life is full of decline, and the stock market has bulls and bears.

The historical rules of stock market volatility tell us,All the falls will pass, and the stock market will always rise higher.

Historical experience has also shown that stock market falls are actually a good opportunity to release risk and create investments.Buy those excellent company stocks at a very low price。

Howard Max is a renowned investment master and founder of American Oak Capital Management Limited. When he was just entering, an old man talked to him about a cycle about the bull market.

Seniors say that bull markets are actually very simple, divided into three stages: in the first stage, a few visionaries begin to believe that things will get better; in the second stage, most investors realize that progress has happened; and when it comes to the third stage, people insist that everything will always be better—when consensus transcends It is common sense that the bull market has come to an end.

Howard Max found out during the 2008 mortgage crisisBear Market also has three stages: First, a few investors smell the risk in the frenzy; then most investors begin to feel the deterioration of the situation; finally, everyone is immersed in pessimism, believing that the situation will only get worse, and the bear market may see a bottom.

Source: China Fund Newspaper

Max thought,The key to successful investing lies in the face of adversity — without success。 Only when most people do not see the value of the investment does the price fall below the value. Therefore, outstanding investors are good at making reverse investments.

Similarly, in 2008, Wall Street was spooked when Lehman Brothers fell, and some even predicted that the entire financial system was about to collapse, followed by a sell-off of assets. However, Buffett published his famous “I'm Buying America” in the New York Times in October of that year:

“Financial markets are in turmoil, whether in the United States or elsewhere in the world. The financial crisis has seeped into the overall economy, and now this infiltration has turned into a well blowout, and unemployment will rise in the near future. Business activity will stall, and the headlines continue to be scary news. So I started buying US stocks.

Why? Because I follow a simple creed: i.e.I'm afraid when others are greedy, I'm greedy when others are afraid。

To clarify, I cannot predict short-term movements in the stock market, and I would not be superstitious about the rise and fall of stocks in 1 month or 1 year. However, there is a chance that the stock market will rise and possibly rally before the market regains confidence or economic recovery.If you wait until the bird cries, you will miss the whole spring.」

Article published 5 months later, US stocks begin a bottomless rebound. In the 12 years from 2009 to the end of 2021, the Dow Jones index rose from a low of 6440 points to 36952 points, gaining5.7x; the S&P 500 rose from a low of 666 points to 4818, gaining7.23 times; Nasdaq rises from a low of 1265 points to 16212, up12.8 times。

Source: Futu Cattle

Bear market sowing, bull market harvest. But most people are hiding in the bear market, chasing the bull market. whileBull markets are the main cause of losses for ordinary investors。

This is because most people think that making money is from short-term trading, not long-term holding. When the bull market comes, most stocks are up and investors prefer to buy higher, sell higher, and earn spreads. Most importantly,They add the most positions after the bull market arrives, not before the bull market.。

In bull markets, many ordinary investors can beat Buffett and think they have found the right investment strategy, found a way to financial freedom. Once they encounter a bear market, they panic and mess up. And whether an investor can make big money in the long run, it's up to what he does in the bear market.

If you think that falling stock prices are a risk, then you better not invest, because there are no stocks that go up or down, nobody knows if tomorrow is a rise or a fall. If a fall is a risk, then you are at risk every day, nervously staring at the so-called risk, trembling heart, which is not PLAY INVESTMENT, THIS IS BEING INVESTED IN PLAY.

If the stocks you buy will be more valuable in the future, short-term volatility is not a risk. Rising is risk, and falling is opportunity. Real investors should be more pessimistic about good company stocks rising and falling more optimistic.

We know the bull market is bound to come, but no one knows when the bull market might come. So, before the bull market arrives, find a good company, and thenBuy low, position heavy, hold long, wait until the bull market comes, who holds more stocks and who earns more。

How to deal with losses in a bear market?

A good chance is the one that screams for you to buy. As in 2008, asset prices were cheap, so there is nothing to fear at that time. There are probably six opportunities to lose gold on this day in your lifetime of investing. —— Buffet

Of course, reverse investing is easy, but difficult for most investors.

For example,The five most expensive words in investing are “not the same this time”。

Although in retrospect, bear markets always end, but when they really get to grips with the negative news around the rooftops, most people can always find various reasons to convince themselves that “it's not the same this time”.

In the bull market, we always thought the bull market would go on forever. In the bear market, we thought the bear market would go on forever. Until the expected real reversal comes, the bull market arrives and they will enter another round of higher losses.

Others are greedy. I am greedy, and others fear me more. The powerful influence of crowd psychology makes group emotions like the palm of a Buddha's hand, and we can't jump out how we jump.

There are two difficulties to reverse the greed or fear of others:How to identify and how to do it?

A simple way, most of the time, our emotions are those of others. So,When you are no longer afraid, you may need to sell; when you are afraid, you may need to buy.

In addition, there is an obstacle to putting the wisdom of “bear market sowing” into practice from knowledge,The immediate result of bear market sowing may be a loss, the result of delay can be to earn money.

It's hard to endure immediate losses and wait for delayed gratification. Waiting for an uncertain future in a loss and not knowing when to settle is even more difficult.

After all, the bottom is not a point, but a space, whether it is a single stock or a large plate. If you buy early, you may experience dark moments, although,It's hard to buy cheap, and the great comes out of it.

So in the face of the bear market losses, we also need some methodologies to get through this bear market time.

1. Be clear about your investment style

Generally speaking, investors in the market can be divided into two categories: trend investors and value investors.

If you are oneTrend InvestorsAnd you may prefer a momentum strategy that thinks the strong are strong, at least for a while, so you should buy high and sell higher. Then the reason you buy stocks is most likely to be a bullish pursuit of a trend.

Participate in the process of strengthening the trend, the effectiveness will be faster, once the rising trend is formed, subsequent flocking followers will promote rise like a straight line, short-term gain may be very amazing.

But it is very difficult to make a profit using trends, on the one hand, most people are difficult to identify and intervene in time at the beginning of the trend, on the other hand, most people are difficult to rationally judge the trend peak and decide to leave.

soTrial and Error and Timely Stop LossThis is part of the strategy, not long-term holding, waiting for the bear market to reverse.

If you are oneValue Investor, you may prefer a reverse strategy, believing in the return of the average, thinking that if a stock has performed poorly in the past few months, it is very likely that the market has mispriced. At this time, buy stocks at an undervalued price and a sufficient margin of safety, waiting for the stock price to return to intrinsic value.

So for value investors, what is needed ispatience. Once a downward trend is formed, the irrational force will also be like driving the upward trend and do not know how far it will push forward. Do not rush to the hand. Start a hand, do not start heavy positions. You can buy in batches slowly, because the process of returning the mean will not happen overnight.

How to deal with bear market losses? Extended Reading:How many years of stock should I count?

2. Keep your mind and earn dividends

There are actually two parts to the source of stock income, one part is the gain from the share price increase, and the other part is the income from corporate cash dividends, expressed in a formula that is:

Stock income = share price increase or decline+dividend income

Dividends are a very important indicator, especially in times of intense market volatility, and companies with sufficient cash on a sustained dividend can give investors a greater sense of security.

BUFFETT BEGAN BUYING COCA-COLA IN LATE 1988, AND BY 1994 HAD AMASSED ITS TOTAL HOLDINGS TO 1 BILLION SHARES AT A TOTAL COST OF $13 BILLION (CORRESPONDING TO A PURCHASE COST OF $13 PER SHARE). After a series of divestments in Coca-Cola, Buffett now holds 4 million shares, representing 9.25% of Coca-Cola's total floating shares, and a market value of more than 220 billion. That is, the increase in share price alone has brought Buffet more than 16 times cumulative earnings ($220.13 billion = 16.9).

butThe more important change also comes from dividend income。 As shown in the figure below, Buffett received a dividend of $7800 million in 1994, but with the year-on-year growth of the company's dividend per share and the decline in the cost of ownership after the split, by 2022, Buffett's annual dividend had grown to $7.04 million, corresponding to its dividend yield of 54% for the year.

And 29 years Buffett obtained a total of accumulated dividend income of $10.09 billion, compared to $1.3 billion of investment principal, dividend income also brought BuffettMore than 6x cumulative revenue.

Perhaps someone will say that it is a large amount of money invested in Buffett, so how much does it earn?

Here we assume that small A also followed Buffett in 1994 to buy 100 shares of Coca-Cola, cost $13/share.

So like Buffett, in 10 years he received accumulated dividends can reach $1464, more than its buying cost; get 2022 cumulative dividend income of $10090, compared to $1,300 of investment capital, dividend income also brought more than six times the accumulated income to small A.

Is not very exaggerated ~

And, over time, the absolute amount of dividends has an increasing impact on investment income,The impact of stock prices is no longer a decisive factor。

For example, Coca-Cola shares peaked in 1998 ushered in a wave of 15 years long big bear market, the share price fell by 50%. During this period, Coca-Cola's dividend yield continued to grow, and ultimately stable at around 3%, also gave Berkshire a total of 4.1 billion dividend income, nearly three times the principal invested, helping Buffett to carry through the darkest period.

Source: yahoo

Now, Buffett doesn't do anything every year, and even if the stock price drops, he can still get $7 billion in dividends ($1,300 at the beginning of the corresponding period, a small A dividend for 100 shares is $700), and it's a wonderful thing to think about.

soA consistently stable dividend is the bulwark for investors to cross the bull.

How do I choose a dividend stock based on the spectrum? Extended Reading:The first choice for low-risk investors: read the investment value of dividend stocks

3. Ding Tou Bear Market

There is a well-known saying by Peter Lynch:Wanting to buy a falling stock on the back is like trying to grab a falling knife。

And the second half of the sentence has a deeper meaning: usually a more stable way is to reach the ground until the knife falls to the ground, shake and shake it for a while, and then stop moving, and then it's not too late to grab the knife.

That is, if you only see “bottom” as a point, then what you are looking for is most likely an “exact error”. The bottom is most likely not a specific point, but a long interval, at which point if you only see a fall and replenish, then you are likely to get “ongoing pain”.

And in the face of Schrödinger's “bottom”,Monthly supply (fixed bid) may be one of the more suitable methods of translation for ordinary investments。

Because batch inputs are objectively achieved through the implementation of investment plans on a regular and fixed basis,Avoid the risk of one-time high purchases; more importantly, the monthly supply can “keep” investors out of the hands of the behavior, mitigating the disruption to investor choices and effectively prolonging the investment cycle.

As shown in the chart below, 21.49% of investors in institutional research adopt monthly supply, but thanks to a disciplinary investment through monthly supply, the monthly supply of customers both profit and average yield are higher than non-monthly supply.

How to bet on a bear market? Extended Reading:Is there a way to make money when you lie down?

summed

When you invest in the short term, you can only earn 90%, and when you invest for the long term, you can earn ten times as much. —— Peter Lynch

Nasim Taleb used an example like this in his work Random Wandering Fool: Suppose an investor can make an annualized return of 15% with volatility (or uncertainty) of 10% per annum, after conversion,93% probability of making money in any year。 But split for a short time,The probability of making money in any second is only 50.02%, almost toss coins.

Probability of earning under different time dimensions

The logic of the calculation is to translate the approximate return on investment of the above investors into a normal distribution model of 15% with a standard deviation of 10%, as shown in the figure below. Based on the nature of the normal distribution, we can calculate that the probability that the investor will have a return on investment less than 0 in any year is approximately 6.68%, that is, the probability that the investor will make money in any year is 93.32%. And once we shorten the observation time, its probability of making money gradually decreases, and when this time break is reduced to one second, the investor has a probability of making money only 50.02%.

Visible longer term high trade win rate, putting short term win rates approximately equal to randomness。 So traders who pay too much attention to randomness (short lines) will mostly feel overwhelmed and even live in agony every day.

Stocks that want to make big money must be based on holding, not trading.Holding for the purpose of holding is a stock thinking, and selling for the purpose of selling is a speculative thought.

Buying for the purpose of selling, the stock price falls after buying, it is easy to feel bad, to see other stocks go up, it is easy to stop losing, to chase rising stocks, and then to continue to pursue high hedges and to stop losing.

Buying for the purpose of holding, the stock price falls after buying, and there is a feeling that money wants to buy, and there is no idea of going to the meat cutting hot spot. So, it's the same to buy stocks, the purpose is different, the mindset is different, and the end result may also be different.

Worst of all, perhaps, in a bear market, we can only see the bear market and swallow the fruits of the losses, and in the bull market we can only see the bull market, but the underlying cause of the loss.

The best case may be,In the bear market, we see the future bull market and sow the reason for profit, in the bull market, we see future risks and then extract the profitable fruits.

And only in bear markets can you find opportunities to grow excess wealth, like BuffetMost of the big money making investments are arranged in bear markets。

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