Stock is the equity certificate of listed companies. From the perspective of shareholders of listed companies, companies provide products and services, create profits and create value for society. The profits it creates generally have two places to go, one is dividends. Generally speaking, mature companies are more inclined to pay dividends and return profits directly to shareholders. The second is to stay in the company for technological innovation and expanded reproduction, so as to create more profits in the future. Growth companies tend to retain profits and seek greater development; For shareholders, equity income mainly comes from the performance growth and dividends of listed companies.
In addition, stock is also a kind of circulation certificate, and the pricing of stock is realized through the transactions of countless traders in the market. The stock price P=E*PE, where E stands for earnings per share and PE stands for price-earnings ratio, which is a commonly used valuation index. As can be seen from the price formula, the rise and fall of stock price mainly depends on the profit E and valuation PE created by listed companies. Earning e depends on the company's operation, which requires the company to continuously sell products and provide services. It is a long-term process, and the growth of e can promote the stock price. P/E ratio PE is mainly affected by market sentiment, which may fluctuate greatly in the short and medium term. The book "Smart Investor" compares the market sentiment to "Mr. Market", who will tirelessly quote you every trading day. If we can make good use of Mr. Market's quotation, we can buy when the price is lower than the value, and sell it on the contrary, which can also increase the investment income.
An index is a combination of a basket of stocks, and the investment income of an index fund depends on the income of the stocks held. The income source of index funds, like stocks, mainly comes from two aspects: the price rise and fall of stocks held and dividends. The rise and fall of prices depends on two factors, namely, changes in performance and changes in valuation. The following describes how performance changes, valuation changes and dividends affect the investment income of index funds.
1, the performance change of the index is the most important factor to determine the long-term investment income of the index. Index is a basket of stocks, and the growth of index performance comes from the growth of constituent stocks. Therefore, an index composed of high-quality companies usually performs well for a long time, while an index composed of poor companies does not perform well for a long time.
For example, the CSI food and beverage index (000807) rose from 20 12 on February 29th to June 30th, 2020, from 75 19 to 236 13, with an increase of about 2 14%.
The great contrast between the historical performance of CSI food and beverage index and Shenwan coal mining index stems from the great difference in the performance of the two industries. Return on net assets is an important financial indicator to measure the profitability of a company, which reflects the historical performance of these two indicators to some extent. The average historical return on equity of CSI Food and Beverage Index is around 20%, exceeding most industries of A shares. The historical ROE of Shenwan coal mining index is around 8% on average, which is lower than the average level of A shares.
The huge difference in historical performance leads to the opposite trend of the two indexes. It can be seen that the index price of companies with good long-term performance rises with the performance, while the index with poor long-term performance is depressed by the performance, and the direction of performance changes determines the long-term trend of the index price center.
2. Changes in the valuation of the index The growth of performance determines the long-term trend of the index, while the short-term fluctuation of the index is more affected by the valuation.
The following figure shows the historical trend of the Growth Enterprise Market Index (399006):
From the end of 20 12 to 20 15, the growth enterprise market index rose from the lowest point of 585 to the highest point of 4037, and then fell from 4037 to the beginning of 20 120 19. In a few years, the index fluctuated greatly, and the price of the high point was nearly 7 times that of the low point.
The chart below shows the historical P/E ratio trend of GEM. The P/E ratio increased from 28 times in 20 12 years to 122 times in 20 15 years, and then decreased to 27 times at the end of 20 18. The valuation of the highest point is more than four times that of the lowest point, showing great volatility. As shown in the figure.
The change of index valuation is mainly influenced by investor's mood fluctuation. When the market is optimistic, investors are full of imagination about the future and give high valuations to stocks. In the 20 15 bull market, small and medium-sized stocks were fired. At that time, the price-earnings ratio was considered to have lost at the starting line, and everyone was watching the "market dream rate of return"; When the market is pessimistic, investors feel that the future is bleak and abandon stocks. The depression and madness of "Mr. Market" has brought about great fluctuations in index valuation and investment income of index funds. Therefore, investment index funds should consider how to make good use of Mr. Market's bid, buy when pessimistic and sell when optimistic.
3. Dividend of the index Apart from the rise and fall of the index price, the dividend of the index is also an important source of investment income. Dividends come from the net profit of listed companies and the index with more dividends. Dividend reinvestment can increase the income of index investment. It is also the CSI food and beverage index. From February 29th, 2065,438+02 to June 30th, 2020, the total income index of CSI food and beverage with dividends reinvested rose from 7,967 points to 29,365 points, with an increase of 268%, which was significantly higher than the increase of 2 14% of CSI food and beverage price index without dividends.
To sum up, the investment income of index funds comes from three parts: performance change, valuation change and dividend income. In the process of investment, we should focus on indexes with strong profitability and excellent performance. However, buying a good index is too expensive, and it will overdraw future earnings. Therefore, at the same time, we should also pay attention to the valuation of the index, enter the market when it is undervalued or normal, and leave when it is overvalued, so as to obtain the benefits of valuation improvement.