It may take one or two years, two or three years or even longer for index funds in some excellent industries to underestimate opportunities. China Unicom, for example, has been in a reasonable valuation for almost a year now, and it has spent 50% on overestimating the region. It is uncertain when it will be underestimated.
However, in recent years, there have been two underestimated opportunities, one was the trade friction at the end of 20 18, and the other was the epidemic in early 2020. There will be an underestimation opportunity in about a year or two. If we allocate three markets, A-share market, Hong Kong stock market and US stock market, the cycles of the three markets are different, and the excellent industries such as consumption, medicine and technology are also different, so I think the probability is high. We just need to be more patient.
: Underestimating buying, that is, buying when there is a certain margin of safety, is usually considered from the following three aspects:
1, underestimating the purchase, the valuation returns to make more money.
In the long run, it is true that profit growth is the main way to earn money, but in the medium term, for example, 1-3 years, market sentiment has a great influence on the income of our investment, mainly making money by valuation. There are better returns in the medium term, which is more conducive to our long-term holding.
2. Any valuation has subjective judgment, which may be biased.
For example, what we think is worth 100 yuan is actually only worth 80 yuan. If you buy it at a reasonable valuation, you actually lost 20% when you bought it. If we leave a certain margin of safety and only buy below 70 yuan, then we probably won't buy expensive ones.
The valuation of index funds and stocks is the same, so we should reserve a certain margin of safety for ourselves and reduce the risk of valuation deviation.
3, underestimate the purchase, usually will bear relatively small short-term fluctuations.
For example, if we value something at 100 yuan, the market price fluctuates around 100 yuan. When Mr. Market is extremely pessimistic, he may only report to 60 yuan. If you buy at a reasonable valuation (about 100 yuan), the floating loss is about 40%. If it is underestimated (for example, around 70 yuan), the floating loss is only 65,438.
If you buy at a reasonable valuation, you will not only lose money from market sentiment, but more importantly, you will have to bear greater short-term fluctuations, which requires us investors to have a higher mentality. For example, a floating loss of about 20% is acceptable, but if it is 40% or 50%, many investors will not be calm.