Index funds follow the index and get similar returns to the index increase. If you don't sell it in time when the index rises to a high level, and then fall, the previous increase will be greatly reduced. Therefore, although the index fund is a long-term investment, it must stop profit at a high market level in time to get the maximum income.
But that doesn't mean selling and making a fortune will stop. The next thing you have to do is to make a profit before investing. Start the next round of fixed investment with the principal and income in hand.
At this time, you may encounter several situations:
1, the market began to fall, after a period of shock adjustment began to rise, out of the U-shaped smile curve.
This situation is the most ideal state, selling at a high level, making a profit, and then starting a new round of fixed investment with more funds.
There are two ways to make a fixed investment. The first is to continue to invest in the original fund. A shares have a high probability of a small bull market within 1 to 3 years. You can divide the money into 24 months and invest it in the fund.
In the shock and decline of the market, the cost is constantly shared. The lower the market falls, the lower the purchase price, and the lower the average cost, waiting for the bull market to come again and sell at a profit.
Another way is to invest in another index fund. The style of A-shares often changes from time to time, so it's best to have a large-cap index and a small-cap index, no matter which one goes up, we will hold it in our hands. Or a combination of industry indexes to spread risks.
If you already have several funds in your hand, you can sell the one that has gone up in your hand, add the money you earned and the principal and invest in a cheaper fund. Selling at a high price and buying at a low price can further increase the income.
Or you can find another cheap fund to invest in.
Everyone can't accurately predict the high and low points of the market. What a fixed investment can do is that no matter how the market goes, you can get chips at a relatively low price, not necessarily the lowest price, but it will not be the highest price, and you will not miss investment opportunities because of waiting.
Because we reinvest after making a profit, we continue to invest the money and principal we earned in a new round of fixed investment, so as to make a profit and get higher returns. Therefore, index funds can enjoy long-term benefits after making profits at high points.
2. After selling, the market continued to rise, then began to fall and walked out of the inverted U-shape.
In the face of this situation, there are two ways to deal with it:
First, when taking profit, if you can't see the future trend, you can take the method of taking profit in batches, so that even if the market continues to rise, some bottom positions in your hand can get more benefits. You can also start the next round of fixed investment later, which is equivalent to reducing the buying cost.
Second, even if a new round of fixed investment is started after profit taking, there is a trend that the market will rise first and then fall. We don't have to worry too much, because we know that the market will rise again soon, which is only a matter of cost and time.