In 2009, he took 30,000 yuan of money into the market, ups and downs through 12 years of investment road, he experienced the unpredictable changes in the market, but also know his own smallness. Investing has taught him that "everything in the world is a probability" and requires greater ability to face an uncertain world.
In life, he pursues minimalism and is a staunch supporter of the Fire (Financial Independence Early Retirement) movement; in his studies, he comes from an IT and biomedical background, indulges in daily study of financial professional courses, benefits greatly from Strong's Portfolio Management, Richard and Reynold's Active Portfolio Management, and begins the road of quantitative investment, favoring low-valued and high-dividend assets; in investment, after several rounds of bull-bear, he has formed a "key investment fund, focus on asset allocation, emphasize risk management, With the help of quantitative means "investment style.
He believes that a rational financial model can avoid some pitfalls, and he also firmly believes that only with emotional market insights and human insights can we make good investments. Let's walk into the investment story of @Polly Fund with Brother Xiu today.
<h1 class="pgc-h-arrow-right" data-track="5" > initial investment, which is the interest on the old money in the passbook</h1>
The awareness of investment is formed during the reading period. The earliest to know that investment is to go to primary school, there are several parent work books at home, the content is related to banks, stock markets, futures, do not understand it as an idle book. When I was in the senior grades, I had a passbook that my parents helped me with, so I put in the money and exam rewards, and I cared about how much interest I could get, and the snowball road began from then on.
The interest in the passbook gave me some inspiration, and when I was in junior high school, I bet with my classmates before each exam, if the rank is lower than a certain value, the classmates give me dozens of dollars, and I can get psychological comfort when the exam is broken; I give him the same amount of money after the exam, anyway, the family gives more rewards. Now it seems that at that time, there was already a sense of hedging risk, which was the earliest "derivatives" transaction.
Later, in the big bull market of 2007, the elders around them entered the market, and everyone talked about stocks and funds, and they also began to pay attention to the financial market. "Ten years of gold bull market", "dead do not sell" is still fresh in memory, people from that era, will not easily believe that the "track" forever cattle such a thing. Seeing the bubble turn into a bubble, I also saw the unpredictable changes in the market, I intend to do a good job of knowledge reserves and then open the road of investment, in 2009 the market recovery I officially opened an account.
From 2009 to 2021, 12 spring, summer, autumn and winter accompanied by investment, I felt the most deeply is "unknowable". After several rounds of bulls and bears, I know my own smallness and slowly feel that it is not only the stock price, but also the probability that "everything in the world is probability". One may know the probability of certain events, but most of the results are unknowable and uncontrollable. All we can do is to "choose" a track with favorable probabilities (such as funds), "effort" slightly affect the probability of success (quantitative screening of funds with high excess returns), and try to transform favorable probabilities into successful results (long-term holding) by "insisting", and if the results are not satisfactory, we must also "accept" (do a good job of allocation risk control, so as not to cause serious damage).
Financial markets are a quantitative version of society, and these truths apply to other areas as well.
<h1 class="pgc-h-arrow-right" data-track="11" > the investment path of surplus and loss, and the important thing is to continue to grow</h1>
My investment mainly relies on portfolio management, achieving a steady return, a low drawdown (no more than 15%), and holding a single fund and stock position is not heavy. The daily routine of the portfolio is: this rise and that fall, there are few particularly prominent big bull stocks, and there are few times when thunder and losses are tragic. But there are still many investment cases worth sharing over the years.
Filled with the first pot of gold by chance
In 2009, I took my own 30,000 years of pressure money into the market, cautious, more and more rising, watching the brokerage research report bought a bunch of stocks, to the middle of the year the market rebounded violently, floating profit almost spit clean, feel that they are too dish, this road is not passable. Start searching for fund forums on the Internet, learn the basic principles of closed funds from the posts of teachers such as Feng Ji, and generally understand the sources of income of closed funds: net value growth, discount convergence, discount dividends, of which net value growth is the most important. Combined with the book, knowing that the Sharpe ratio considered both risk and return, he used the straight-flow data to calculate the Sharpe ratio and selected some promising funds. At that time, Xinghua was a bit like the current Xingquan trend, and the successive managers could be described as brilliant. In the summer of 2009, the market sharply retraced from 3400 points to more than 2600 points, just at this time to enter, do not understand what valuation, PE, PB, probably look at the K line pattern to do W bottom to buy, is also good luck. Soon the net value rose, the discount converged and doubled, and the profit exceeded 10%.
The contingency of the first bucket of gold is actually very strong, simply using historical performance and risk to select funds, using historical data to extrapolate to the future, ignoring performance attribution and mean reversion, but also laying hidden dangers for later investment. Solving these problems is many years away.
A case of a plunge in expensive tuition fees
In the second half of 2016, the high buying of Huili B. It was a leveraged bond fund, and at that time, huili B had a high historical yield, and the historical risk was lower than that of a stock fund, which was very cost-effective. It is also very academic to learn bridgewater's all-weather allocation, the key point is that bonds need to be leveraged, amplify risk, and reach a level close to that of stocks (risk parity). Buy Huili B for the above reasons, but completely forget to look at the Treasury yield or the Net China Bond Index. After half a year to catch up with the bond bear market, Huili B plummeted all the way, and finally broke through the psychological defense line, accurately cut the meat at the lowest point, and completely lost the income of the stock fund that year.
Through this incident, I realized that it is very easy to pay tuition fees due to textbooks, theories, and models, lack of practical experience and high-level guidance. It is still necessary to combine theory with practice and learn in actual combat. In addition, fixed income funds also have no small risks, and long-term yields are often inferior to equity funds. Later, with the bear market in 2018, the proportion of equity funds was greatly increased, and the more it fell, the more it bought, laying a good foundation for subsequent investment. At the same time, we have learned the lessons and developed a timing model for bond funds to avoid low-level mistakes as much as possible. Here is a reminder to buy fixed income + friends, enjoy the benefits at the same time, must have expectations for potential risks, this is not capital protection financial management.
A winning bottom-reading grid
Increase investment during the epidemic in 2020. During the epidemic period, many people were very pessimistic about the market, the market plummeted on the first day of construction, and several on-site funds fell to a stop or close to a stop, and the relative valuation was significantly discounted. At that time, it decisively dispatched 20% of the position to buy funds such as Xingquan Trend, Invesco Dingyi, and GF Small Cap. Subsequently, U.S. stocks plummeted, and the domestic market fell twice. According to the PB indicator combined with the risk control model to determine the bottom grid, while buying the fund, use spare funds to sell put options in the option market, and earn a lot of option premiums during the high volatility period, which also achieves the purpose of automatic grid bottom reading. Buy BAM, BPY in batches, and successfully privatize BPY in 2021, from a loss of 50% to a profit of more than 60%.
This successful investment experience made me understand three important points:
1. The diversification of funds is very important, and bond funds and cash can provide opportunities for cheap buying at critical moments;
2. Risk control is very important, the bottom also needs to be carried out in batches under the guidance of valuation indicators, under no circumstances can exceed the risk tolerance limit, and the risk budget should be done in advance and not cut meat afterwards;
3. Emotional control is important, look at risk indicators when you are rising, and stick to it for a moment when you are darkest. Quantification is important and is the best way to overcome emotions, the unknown, and confusion.
Looking back now, the beginning of the fund investment road is a key step for many years of investment without big losses and small gains. I have to admit that I was (and is about the same now) seriously lacked understanding of individual stocks and industries, and I was not familiar with business models. Using some second-hand, fragmented news to buy a stock, like a moth to a fire, it is lucky to be able to run out in the pullback. Buying funds is to stand on the shoulders of giants, evaluate funds with the method of evaluating portfolios, and select funds with good performance to build a portfolio to reduce volatility, which is relatively easy.
I also have a special thanks to Snowball. Snowball is the best investment notebook, full of past successes and failures, very conducive to reflecting on growth. The simulation portfolio function is a powerful tool for dissecting one's own problems and exploring investment strategies.
<h1 class="pgc-h-arrow-right" data-track="24" > adhere to a strategy of steady returns and lower drawdowns</h1>
After years of wrestling in the market, I began to develop my own investment philosophy: focusing on asset allocation, emphasizing risk management, and using quantitative means.
Asset allocation is the biggest contributor to long-term yields. My principles are: active (higher equity asset investment ratio, not less than 50%), balanced (industry equilibrium: investment in balanced style active funds and broad-based indices; diversification of large-scale assets: simultaneous investment in A-share funds, U.S. stock funds, bond funds; strategic diversification: simultaneous investment in active funds, new index funds, and bond-to-bond funds).
Risk management is the magic weapon for survival. The principles are: confidant (through long-term experience, understand their own risk tolerance, such as the maximum drawdown of 15%); know the other (understand the risk characteristics of the asset, such as the maximum drawdown of equity funds up to 30%). On the basis of knowing oneself and knowing one's other, determine the allocation ratio of various assets. Based on the example I gave, it is roughly estimated that equity funds can be allocated 50%.
In addition to the risk control at the absolute return level mentioned above, another point that cannot be ignored is "active risk", that is, how much deviation the stock invested by the fund manager from the benchmark CSI 300. I prefer fund managers whose industry allocation is less concentrated. Excessive concentration on some "tracks" and "Maoning" may bring good performance in the short term, but after the market style switch, it is easy to only earn the index and not make money.
To achieve the above two points, it is feasible and beneficial to rely on rough estimates and qualitative analysis. Periodic reports of the Fund provide sufficient information. Quantification models are more timely and reliable. For example, the CAPM model can be used to calculate the fund's excess return (alpha), that is, to exclude the remaining part of the market's rise and fall, and better judge the ability of the fund manager. The fund style can be quantitatively judged using the Fama-French three-factor, as well as the excess return after the divestiture style. With different styles of funds, excess returns are more stable. Use assets or factor covariance matrices to better estimate risk, determine asset allocation, and more. Quantitative data sources are mainly Jukuan network and choice, nut network. Qualitative analysis can be seen in the analysis of snowball teachers. Morningstar has data on the retention rate of fund managers and the overall performance of the company.
Here I would also like to mention my attitude towards financial models. Quantitative financial models are good information processors that can turn good investment ideas into real returns. It is not appropriate to deify quantitative investment and financial models, if only the model lacks insight, the garbage information input into the model, can only get useless results; it is not appropriate to blindly think that the financial model is useless. The model cannot make precise predictions about the future, but it can guide the right direction and avoid unnecessary losses. A 51% predicted win rate can also lead to excess gains.
In addition to screening with quantitative indicators, qualitative analysis of active funds is also important through "good company - good manager - good fund". It's like seeing a doctor and going to a big hospital to find a specialist:
The characteristics of a good fund company are that its funds have good performance, the team is high-quality and stable, and the internal control and corporate governance are better (there is no obvious scandal), which can partially offset the impact of the change of fund manager and reduce the probability of the "agent problem" harming the interests of the basic people;
Characteristics of a good manager: the style is more stable, the management performance is medium or above, and the bear market is resistant to beating. Then select the flagship fund managed by the manager. It is usually the one that was established earlier and performed better.
<h1 class="pgc-h-arrow-right" data-track="33" > a steady stream of power from the ideal state of life</h1>
I am a strong supporter of the FIRE (Financial Independence Early Retirement) movement, a way of life that aims at economic independence and early retirement, valuing spiritual well-being more than material satisfaction. Fire campaign supporters gathered into a community, diy instead of buying and buying, exchanging investment experiences with each other, and proposing the "25 times principle", that is, saving 25 times the annual living expenses and withdrawing 4% from the portfolio every year to achieve the goal of "early retirement". My self-built Monte Carlo simulation model suggests that if the balance/salary income is above 50% and the annual return on investment is higher than 9%, there is hope of achieving the goal. That's what investing means to me so much.
He is the stone of the mountain and can attack jade. China's sages have long left relevant lessons. "Quiet to cultivate the body, thrift to cultivate morality", "a porridge and a meal, when thinking is not easy to come from; half a thread, constant thoughts of material resources are difficult", "Through the history of the former virtuous country and home, it is from thrift and thrift to luxury". I hope that I, and more people, can escape the trap of consumerism and return to a high-spirited and enterprising living environment, with more free cash flow and free time, and more resources for personal growth, family and social responsibility.
In this regard, I also continue to improve the specific measures of the individual:
1. Actively control unnecessary consumption, appropriately retain expenditures for health, family affection and personal growth, and accumulate financial assets as soon as possible;
2. Reduce wasted time and accumulate human capital. Actively learn high-threshold systematic knowledge, especially professional investment knowledge;
3. Carry forward the diy spirit of makers, do their own things, become a generalist in life, improve the quality of life at the same time, reduce service consumption;
4. Protect physical health, maintain the habit of going to bed early and getting up early, and adopt well-documented health care measures;
5. Try to achieve a high level of long-term yield and controllable drawdown, the method has been said: active asset allocation + diversification can achieve this goal.
The older generation feels that working in state-owned enterprises and institutions is very stable, and the salary is more "reliable" than investment, and it is more "business-oriented". Their views are worth absorbing. Conscientious work is one of the important means of primitive accumulation of capital, and doing addition is more effective than multiplication when there is less money. In addition, the work of bringing stable cash flow is similar to fixed income assets, providing ammunition for additional positions, and can also be part of asset allocation.
But it is extremely dangerous to pin one's happiness on a "stable" wage. There are far from the workplace crisis, and there are recent lessons from salary cuts during the epidemic, not to mention that work, family and health are difficult to balance. Investment needs to be decentralized, and life capacity and income sources need to be decentralized, in order to effectively resist risks, protect health, take care of families, and have more chips and less anxiety in social competition.
In addition, the investment can persist for so long, but also from timely feedback and interest:
The so-called feedback, on the one hand, is to invest in making money to taste the sweetness, will invest more energy, invest for so many years, the happiest moment is the moment of investment income and wage income golden cross. On the other hand, investing has helped me become a better person. People's success or failure is difficult to measure in the real society, and doing right and wrong cannot get timely feedback, and it is too late to wake up. While financial markets are quantitative realities in society, greed, fear, and stupidity can get effective and timely feedback, and the market queen's whip is never merciless. Investing for a long time, the mood is more stable, more afraid of the uncertainty of the world, more humble in the face of success, more open-minded in the face of failure.
The so-called interest, there is an interest in hundreds of millions of real people online investment games, but also the joy of understanding the world and exploring the truth. Getting true knowledge and getting financial rewards is definitely a great joy in life.
<h1 class="pgc-h-arrow-right" data-track="41" > three sentences for the stock market newcomers</h1>
For newcomers who have just started to invest, it is necessary to talk about the harm of linear thinking in particular, that is, simply think that historical high returns represent future high returns. Newcomers often rely on simple yield data or charts to select funds. In fact, we should still do more performance decomposition and attribution, and find out whether the good performance in the past is due to beta (with the market rising), style (betting on the right size and value growth), whether it is the industry (choosing a good track) or individual stocks (stock selection alpha), or playing new and trading capabilities. The valuation of the stock market cannot be infinitely improved, the bond price will not rise to the sky, and it is impossible for individual industries to expand their market value indefinitely without the overall environment. If the fund mainly relies on these to make money, it is likely that mean reversion will occur, and the future return will become worse, which requires vigilance.
I believe that financial theories and models can help us avoid some pitfalls and serve as effective information processors. But insight into industry and human nature is the source of alpha, providing effective input to financial models. Lack of insight, relying solely on models and statistics, the results will not be better than fortune telling.
The "knowing oneself and knowing the other, never losing a hundred battles" in "Sun Tzu's Conspiracy" is actually very suitable for investment:
Confidant: Their strengths and weaknesses, how much risk they can take, in which direction they intend to work hard or actively deviate from the market consensus, and which directions they intend to entrust to the market or professional institutions.
Knowledge: the cognition of human nature, the cognition of the financial market, the cognition of investment targets, the cognition of national conditions and the world.
The future investment road is still far away, I want to give myself and also to the investors who saw this article three sentences:
• Wealthlessness: The primitive accumulation of thrift
• Little Fighting Wisdom: Enter the market as early as possible and learn more high-threshold professional knowledge
• Fight for time: Be a friend of time and risk to obtain long-term stable returns.