Portfolio investment is suitable for us

What kind of investment portfolio is suitable for us? The editor below will tell you how to win with portfolio investment.

When allocating large categories of assets, whether to invest in the stock market is a question that many investors with financial management needs struggle with. Bank deposits have the lowest risk, but no rich man has made his fortune relying on bank interest income. Stocks have created many billionaires, but they face the risk of losing money as soon as they enter the stock market. Investments in real estate, commodity futures, art, etc. also follow The rule of "the higher the return, the greater the risk". As the saying goes, "Don't put your eggs in one basket." How to build a large-scale asset portfolio that suits your risk preferences and tolerance, so as to increase returns as much as possible while bearing a certain risk, or achieve a certain return Reducing risks as much as possible is a core issue faced in the financial management process.

For stock investors, effectively reducing non-systematic risks through portfolio investment is the main way to achieve long-term investment success. Modern portfolio theory holds that investors are inherently risk averse. Top international investment gurus respected by the world, such as Buffett, Peter Lynch, Anthony Burton, etc., their success comes from their superior stock selection ability on the one hand, and good risk control methods on the other. There is no master who has not stumbled on some heavy holdings in his investment career. However, through effective portfolio management, the risk of such mistakes was controlled within an acceptable range, and thus did not cause a major blow to their long-term performance.

In an environment where the mentality of the A-share market is relatively impetuous and investors prefer to grab big bull stocks and pursue fame or instant wealth, the concept of portfolio investment has not yet been as deeply rooted in the hearts of the people as it is in overseas markets. However, the characteristics of the A-share market (the fluctuations of the Chinese economy driven by investment are significantly greater than those of developed economies, cyclical stocks represented by manufacturing account for a relatively high proportion of all listed companies, and the stock market has problems in system design, positioning, etc. Natural flaws, etc.) determine that the stock market presents the typical characteristics of "long bear market and short bull market", so risk control becomes more important, and the importance of portfolio management is increasingly paid attention to by institutional investors. For example, the widely praised social security fund has achieved impressive long-term performance by relying on scientific portfolio investment concepts, methods and processes.

For professional investors, the main difficulty in portfolio investment is how to find a balance between increasing returns and diversifying risks. This is also an issue that China Universal’s investment research team has repeatedly emphasized during the investment management process in the past few years, and that the author has repeatedly thought about and explored in practice. The following are some of the author's rough thoughts and lessons on portfolio management for investors to discuss together:

First, clarify the "long-term" principle. The advantage of portfolio investing is better control over risk rather than all at once. For long-term investment, ensuring the sustainability and replicability of excess returns is far more important than being lucky enough to catch a bull stock and achieve periodic outstanding performance. Only by establishing the concept of long-term investment and accumulating small wins into big wins can we maintain a good mentality during the long-term investment process and avoid losing ourselves in extreme market fluctuations.

The second is to adhere to an objective and independent stance and make reasonable choices between going with the trend and going against the trend.

Two proverbs in the stock market, "Don't go against the trend" and "The truth is in the hands of a few people" show that blindly insisting on investing with the trend or investing against the trend may make mistakes. Smart investors will consider the actual situation. Choose between the two. When the performance of the market, industry or individual stocks is significantly different from your previous judgment, do not be stubborn. First, you should reflect on whether your investment logic and key assumptions have deviated. If you still believe that your previous judgment is correct after repeated demonstrations. Yes, then we must dare to be among the few who grasp the truth.

The third is to broaden your horizons and enhance your understanding and familiarity with various industries.

Only by having a clear understanding of the development status, development trends, current valuation levels and reasonable valuation levels of each industry can we make overweighting and overweighting of each industry based on risk and return levels during the portfolio management process. Reasonable decision of standard configuration or low configuration.

The fourth is to learn to dynamically adjust, evaluate the risk and return of the portfolio according to market changes, and make adjustments accordingly.

From the perspective of major asset allocation, Merrill Lynch’s investment clock reveals that stocks, commodities, bonds, cash and major industries in the real economy have different risk-return characteristics under different macro cycles; from the perspective of style It seems that large and small caps, growth and value are always in a process of constant change; looking at specific individual stocks, stock prices fluctuate every day but their fundamentals do not change so frequently, so the risk-return relationship of stocks also changes Fluctuating at any time. Based on the above factors, if we can comprehensively consider fundamentals, investor expectations, valuation and other factors and continuously make dynamic adjustments to the portfolio, the probability of obtaining excess returns will be greatly increased.

The fifth is to grasp the scale of concentration and decentralization.

You cannot diversify for the sake of diversification. The result of excessive diversification is index-like investment, which can only obtain market average returns. Bold assumptions, careful verification, and the courage to strike hard based on in-depth research are the essential qualities of an excellent investor and the true meaning of obtaining excess returns.