Warren Buffett has a famous saying: three principles of investment, the first is capital preservation, the second is capital preservation, and the third is to remember the first two. This sentence of the stock god is actually a side reminder that investment must be controlled! Today, Bian Xiao will share with you how to deal with the fund's down limit, for your reference only!

For investors, buying a fund is for income, and the risk control ability of the fund is one of the factors that affect the fund's income. An important indicator to measure the risk control ability of a fund is the "maximum withdrawal amount".

Recently, the stock market has been constantly adjusting, and some funds may also be divested. Many people will be upset and at a loss when they face the withdrawal of funds, and some even run away long ago.

What is the maximum retreat?

According to the standard definition, the maximum retracement refers to the maximum value of the rate of return when the net value of the product reaches the lowest point, that is, the worst situation that may occur when buying a product. That is, the maximum loss that may occur during the statistical period. For example:

The highest point of a fund's net value in a certain period is 1.5, and the lowest point is 1. 1 yuan, so the biggest loss is 0.4 yuan, and the biggest retracement is to divide the 0.4 yuan by the highest point 1.5 yuan, and the result is 26.6%, which is the largest retracement rate, which is also 26.6.

So, why should we pay attention to the "maximum withdrawal" when choosing a fund?

Because the maximum retracement is a very important risk indicator:

First, it reflects the risk control level of managers; The second is to form the investment experience of investors; Third, it determines the income level of investors.

The maximum withdrawal is harmful to compound interest, doubling the previous year and only raising 50% in the second year can make compound interest zero. The reverse is also true. If you withdraw 50%, you need to increase 100% to recover the cost.

For example:

A fund bought by Xiaoming in 10 yuan rose to 10.2 yuan, then went down to 6 yuan and then rose to 9 yuan.

Then the maximum withdrawal rate of funds purchased by Xiaoming during this period is (6- 12)/ 12≈-50%, and the maximum withdrawal rate is 50%.

So, if you want to go back to 12 yuan from 6 yuan, how much do you need to increase?

The answer is: (12-6)/6≈ 100%.

So generally speaking, the maximum retracement is directly proportional to the risk, that is, the greater the retracement, the greater the risk.

However, investors need to pay attention to and understand the maximum retracement, but over-interpreting it as an indicator of choice and judgment will bring some negative benefits.

Because in the process of fund management, the control of cash withdrawal and the income of the fund are contradictory. From the perspective of risk control, controlling retracement is nothing more than controlling the total position or controlling the position ratio of awkward stocks. It is extremely correct when the stock goes down, but once the market reverses, the low position will turn into a short position.

Bian Xiao counted the maximum retracement and annualized returns of all stocks, partial stocks and index funds in the market in recent three years. In fact, you can also see the weak relationship between the two. If the correlation is strong, the yield of small retracement is smaller, and most of them conform to normal distribution.

Therefore, although the maximum retracement is proportional to the risk, it can be seen that the retracement is well controlled and the Foundation has done a good job.

What if the fund withdraws?

It is normal for funds to withdraw. After all, the market is volatile, and the net value of the fund can't keep rising. It's not a time deposit investment. Therefore, Bian Xiao gives you a few tricks:

1. Make friends with time.

There is a saying that is apt: "It is difficult to be widowed by keeping the foundation."

For example, I often see many investors pay attention to the net fund value of their positions every day, and their emotions fluctuate with the net fund value. They like to compare with the same type of funds, and they can stand it when they reach the top. If they reach the bottom, they can last two days a day. If they lose the same type or retreat within a month, they can't stand it, either changing funds or redeeming them.

The investment income of the fund is "nonlinear". 80% of the fund's income comes from 20% of the time. You have to endure loneliness 80% of the time to really earn 80% of your income.

Therefore, if the retracement is reasonable under the existing investment framework of fund managers, we think it is a benign retracement.

For example, since the beginning of this year, due to market concerns about the epidemic, there has been a sharp retreat after the holiday. However, if the company bidding by the fund operates normally and does not change its long-term logic, then this is a benign retracement, and the lower valuation provides an opportunity to add positions.

What we need to do at this time is to trust the fund manager and wait for the flowers to bloom.

2. Invest by fixed investment.

Get on the bus by means of fixed investment, avoiding the trouble of retracement.

According to the data calculation, even if it is the "3000 points in ten thousand years" Shanghai Composite Index, we also choose it as the target of fixed investment. The starting dates of fixed investment calculation are 20 16, 20 17, 20 18, 20 19, 2020 respectively, and we will find that fixed investment is simple and effective.

3. Retreat is the time to add positions.

For long-term funds with good performance, retracement is the opportunity to add positions, and you should be happy rather than annoyed. After all, such opportunities are rare. Seize the opportunity to retreat and add positions, and the overall income will be better in the future.

How to guide fund investment with maximum retracement?

We also said before: "Funds make money, but ordinary people don't". One of the important reasons is that there is no comprehensive and correct understanding of the volatility of funds.

When the market fluctuates, it is normal for the net value of the fund to fall back. However, if the fund withdraws too much beyond its tolerance, it will inevitably produce negative emotions such as anxiety, and even make irrational investment behavior, thus failing to achieve ideal returns.

Therefore, before you invest in funds, you must first correctly understand your risk tolerance. For example, within one year, it is acceptable for the purchased funds to fall.

For example, the maximum withdrawal of a fund is 30%, and the risk you can bear is that the position falls 15%, so it is recommended to buy 50% of the fund and make some steady investments in the remaining positions.

Finally, remind investors that today, it is only from the perspective of risk control, but when investing in funds, it is not comprehensive to measure the quality of a product only by the maximum withdrawal. The maximum withdrawal of funds is affected by market conditions, the management ability of fund managers, the sensitivity and judgment to the market, the control ability of positions and other factors. In the face of the great retreat under the extremely harsh background, it is also very important whether the net worth can come back to life.

Therefore, compared with paying too much attention to the maximum retracement, being an excellent investor often needs to keep calm when the market panics and follow the fund manager with excellent thinking and steady style, which is the quality that investors need more.

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