The profitability is the profit of the company divided by the market value of the company. Generally speaking, the higher the profitability, the lower the company valuation.
How to use the rate of return to invest in index funds?
Statistics on historical data show that if you start investing in index funds when the rate of return is relatively high, the long-term return will be quite good, and vice versa.
We use the profit rate of 65,438+00% and 6.4% as reference indicators. When the profit rate is greater than 65,438+00%, we start to make a fixed investment. On the premise that the yield is significantly higher than the risk-free interest rate in the same period, the yield is above 10%, and the risk-free interest rate can refer to the yield of 10-year treasury bonds.
When the rate of return is lower than 10%, the index fund loses its appeal and has no significance of fixed investment. The share that has been fixed investment can choose to continue to hold.
When the yield is lower than 6.4%, the fixed investment will be suspended, because the long-term average yield of bond funds is around 6.4%. If the yield is lower than 6.4%, it is better to invest in bonds directly. After all, bonds have a lower risk factor.
The fixed investment strategy of index funds based on yield method was founded by Graham. After decades of market tests in various countries, it still stands. Can be said to be a very simple and effective strategy. By this method, the average yield can reach 65,438+05%.
What is the application situation in the domestic market? We take the SSE 50 index as the specimen and guide the fixed investment through the income return method. The average annual return rate of SSE 50 index funds can reach 29%. If it is just an ordinary fixed investment, the rate of return is about 12%. In other words, with the strategy of profit return method, the income of fixed investment can be more than doubled.