Face the normal or abnormal fluctuations of the stock market and avoid the permanent loss of principal.
At the moment, the stock market is in an outlier period. After the introduction of a number of policies to activate the capital market, the stock market has evolved from a 3,000-point defense battle to a 2,600-point defense battle. What was expected to be a good start in early 2004 turned into a 21% monthly decline on the GEM. Most shareholders are passive, afraid of holding shares, and can't sleep at night, not knowing when this nonsensical decline will end. There are also some shareholders who have liquidated their financing positions and their assets have returned to zero.
After the stock is bought, it is not as expected that there will be floating losses. Profit and loss are of the same origin, and sometimes, enduring a certain range and a certain period of floating losses is also the price you must bear to make a profit in the end.
Value investors need to be comfortable with stock market volatility.
Stock price volatility means that the market value of the asset held by the shareholder stock fluctuates. Stock pricing is based on the expectation of the future performance of the company, which is always formed in the context of insufficient information and time-changing information, which is probable, which also means that there is a risk in holding shares, which means that since you invest in the stock market, you must bear the fluctuation of stock prices.
Generally speaking, a fluctuation of about 1% in the market during a day is a normal fluctuation, while a fluctuation of more than 3% or more is an abnormal fluctuation and a major reversal in market expectations. Abnormal market volatility: Emotional extremes during periods of market value loss are unpredictable. Misfortune is based on extreme pessimism or optimism about future economic expectations, which cannot be verified or falsified in the present, and are left to imagination.
Whether dealing with normal or abnormal stock market volatility, value investors seek out or hold high-quality assets. There are wise people who say not to waste every economic crisis. The code word is that only in times of crisis will there be a window of opportunity for good prices for high-quality assets in the stock market. In a normal equilibrium market, good stocks basically don't have good prices. This opportunity window accounts for less than 5% of the stock market cycle.
Finding or holding quality assets requires end-game thinking. That is, the belief can be realized, and stocks with sustained high growth and good prices will have a bright moment in the future. Finality thinking is to be able to see the sunset in the dark night that no one can see. Of course, some people can only see if they believe, and more people will believe when they see it.
However, the floating loss of the stock may also evolve into a real loss, and it can also cause the permanent loss of the principal, the stock market for individuals, a red line, the biggest risk you want to avoid, is that the loss exceeds the amount you can bear, causing you to permanently withdraw from the stock market.
The significant risk of this significant personal risk comes from several causes, one of which is the mismatch of capital time. Individuals' short-term funds are used as long-term investments, and they are forced to cut their flesh deeply when the market is in a downturn. In terms of the time dimension alone, the win rate of long-term and short-term funds is different. Second, excessive leverage and passive liquidation. Third, heavy stocks have encountered black swans of individual stocks. Positions are overly concentrated, and the fundamental trend of the stocks held is deteriorating, which is difficult to reverse.
If so, facing stock market volatility also includes reducing positions and hedging when the stock market falls short of expectations, especially when it falls significantly short of expectations. Stock investment is a way of life and a long-term business, you have to keep yourself in a good state of mind and a normal mind. When your position has changed your quality of life, you can't sleep at night, and you must reduce your position in time when the pressure is too high. Leveragers must reduce leverage to prevent occupations from blowing up and assets from being cleared. The battle of the stock market is determined to be a lifetime, not a moment. The stock market, uphold value thinking, endgame thinking, and keep the red line, so that there are unlimited opportunities.
The cold winter of the Year of the Rabbit is over, and the Year of the Dragon is full of flowers. I wish you all the best in the Year of the Dragon!
