Meet the best investors in the world, starting with "Zhuge Harry"

Author: Steve Brice, Chief Investment Officer, Wealth Management, Standard Chartered Bank

When I joined Standard Chartered 24 years ago, I met the world's best trader, Harry Harry. He always has a perfect grasp of the market timing, buying low and selling high. There is no doubt that the return on his investment is always honey.compelling. His only problem was that he could only "predict" the outcome based on what had already happened. In the real world, we don't know the outcome until we've made a decision. This means that we must consider uncertainties that fundamentally change the way we act and plan, far from ideal.

Learn from experience

In a world of vagaries and complexities, there is always a reason not to invest. Unfortunately, when we try to predict the future, it's always natural to pay more attention to negative information/opinions, and there will be a lot of people who make us believe that investing now is a bad idea. In addition, we tend to summarize history simply and recklessly predict the future with experiences that are not accurate, or at least incomplete, derived from it.

For example, if I told you that in the next two years, the world will encounter an unprecedented epidemic, and two years later, there will be a rapid spread of new mutant strains, and the number of new infections in the United States can exceed 1 million in a single day. Would you believe the stock market can rise 30% in that environment?

As you may have guessed, I am using The professional ability of Zhuge Harry to let go of the afterburner. Because of the above, it is what has happened in the past two years.

Stay optimistic

Of course, at the end of 2019, I couldn't predict a global pandemic. To make matters worse, I could only use my experience during the SARS period as a framework for analysing the COVID-19 pandemic (at least at the beginning), when I was living in Singapore. So I thought China would quickly rein in the COVID-19 pandemic (yes, but that's not the question itself), and it took me longer than Zhuge Harry to find out how serious it was this time.

Fortunately, as an investor, there are two things that keep me at bay – optimistic nature and a proper approach to investing.

If I had perfectly foreseen the COVID-19 pandemic, it might have been hard to keep bullish stocks. But the strong fiscal and monetary policy response of countries around the world supported my optimism about the market outlook and led me to keep investing throughout, thereby boosting portfolio performance.

Investment plan

In terms of investment plans, I will increase my positions when the market is weak, and rarely reduce my holdings when the market is strong. This unilateral approach to investing stems from three basic beliefs:

Stocks have always risen in the long run

In any rolling 12-month period, stocks are about twice as likely as bonds to outperform stocks

The timing of the market crash is very difficult to grasp

I think most people will roughly agree with the first two points, so let's explore the more controversial third belief. Here, I have two perspectives to share with you.

First, analysts use a number of indicators as a signal that the stock market is likely to perform weakly, such as the volume of stocks financed on margin, the inversion of the yield curve, and the share of stock market capitalization as a percentage of GDP. However, we have not yet found any individual indicators, or individual indicators that can be combined with the above indicators, to forcefully overturn the applicability of the second article over a period of 12 months or more.

Capture opportunities

Secondly, what people often overlook is that it is necessary not only to grasp the timing of the market peak, but also to correctly judge the timing of the repurchase. Let's take the COVID-19 pandemic as an example. Sitting on the sidelines during the March-April 2020 stock market ups and downs is much better than selling a position a month after global equities peaked and then re-entering the market a month after it bottomed out to buy back shares. In the second case, the price of the repurchased shares will be 10% higher than the price at which they were originally sold.

Of course, the real results tend to be much worse. I've met too many planned investors who have a seriously under-positioned stock because they have sold heavily during the pandemic and therefore missed the previous rally and have been waiting for a better market entry.

Get a peek at the target and start investing

What should these investors do now? I have three suggestions. First, determine the investment allocation for the next 2-3 years. Second, start with a small investment, but stick to the goal from the beginning. Inject savings into investment on a regular, instalment, and accelerate purchases in the event of a big drop in bonds or stocks, while trying to shield alarmists who can be a drag on the performance of your long-term portfolio. Third, keep your investments diversified. When starting to invest, try not to focus on niche areas - you can increase this type of investment after the basic configuration is established, niche areas are not suitable for beginners. Another thing that worked was to generously admit to himself and his family that he was not Zhuge Harry, and everything was predictable.

This article originated from the financial world