In the world of investing, patience and wisdom are the keys to success. Before entering May, as individual investors, are we ready to rest in the stock market? While pursuing investment returns, should we pay more attention to risk management and asset allocation? Mr. Li Guangyi, the director of the "Global Asset Allocation Methodology" column of Yicai Zhizhi platform, will talk to you about the resurgence of the stock market and the golden rest period for investors.
The stock market is back in turmoil, and investors are in a golden break
Today's content does not talk about the markets that are very close to us, nor about the cross-border ETFs that are often involved.
I would like to share with you some anecdotes related to investing, a total of three stories.
Stock Market Legends: Warren Buffett's Neighbors and the Value of Long-Term Investments
First, let's talk about Warren Buffett. Recently, overseas Chinese media once again told an old story about Buffett.
This story took place in the 90s of the 20th century, when the famous American media "The New York Times" once revealed it. This story has to do with investing.
Around the 1960s, Buffett was not as famous as he is today. He had a neighbor who may have been mentally ill. Despite this, Buffett has a good relationship with their family because, after all, they are neighbors.
They often play bridge together, and even on some important festivals in the West, such as Easter, Buffett will invite their family of four to dinner at home. So, they have a very close relationship.
In this story, Buffett's neighbor couple has $67,000 in savings on hand. They don't know about stocks, equities or other investment methods, but they know that Buffett has become a well-known and very talented local investor.
After the couple discussed, they decided whether they should give the money to Buffett to invest. Because they knew that the minimum investment amount that Buffett usually accepted at that time was $150,000 to $200,000, and the $67,000 they had on hand seemed too little, and they were worried that Buffett would not accept it.
Still, the couple plucked up the courage to pitch their idea to Buffett. Unexpectedly, Buffett agreed without hesitation and expressed his willingness to help them invest. The couple trusted Buffett, gave him the money, and in the days that followed, they never interfered with Buffett's investment decisions.
According to the New York Times, Warren Buffett happened to set up an investment company at the time. According to the report, the company was founded in 1960. Since then, Buffett's neighbor couple has given him $67,000 to invest.
Then, when The New York Times told the story in 1996, they calculated that they could hold about 883 shares based on the $67,000 purchase of Berkshire Hathaway's A-shares that year.
Based on the 1996 Berkshire A-share price, the total value of these shares has reached $25 million, which means that the original $67,000 has grown 2,000 times over the past 30 years.
Here, we would like to emphasize that one of the biggest characteristics of Warren Buffett's stock purchase is that the company never pays dividends. Because there are no dividends, all the earnings are reinvested in the stock, which makes the market value and share price of the stock continue to climb.
If this story is retold by overseas financial media and recalculated, then as of April 11, the share price of Berkshire Hathaway's A shares has reached about $620,000 per share.
If Buffett's neighbor hadn't sold a single share and had held it, his initial investment of $67,000 would have grown to a total gain of about $514 million at the current share price.
If we convert this gain into RMB, assuming an exchange rate of 1 US dollar to 7 RMB, then the return on this investment will be close to 4 billion RMB. This is a very staggering growth that demonstrates the huge returns that can come from holding quality stocks for the long term.
This story shows the huge gains that Buffett's neighbors have made through his investment talents. In the traditional Chinese concept, there is a saying that "distant relatives are not as good as close neighbors", and Warren Buffett's neighbors are such an example.
Because of Buffett's success, his neighbors have also shared in that success. This story has several implications.
First of all, it is important to have a good neighbor. After the neighbor handed over the money to Buffett, he invested only in shares of Berkshire Hathaway for many years. This makes us wonder if we can stick to the same stock for decades, regardless of the market's ups and downs, which is a test of investors' patience and controlling fear and greed.
Second, in a particular stock market, we need to find individual stocks that can outperform the market index. Of course, it will take time to verify whether such a stock can be found.
Finally, Warren Buffett advises everyone to invest in indices, especially the S&P 500. He believes that this is a solid investment option rather than the Nasdaq index. Therefore, he advises investors to buy the S&P 500 index without a premium in yuan on the Shanghai and Shenzhen stock exchanges. Again, it is emphasized here that the reliable investment option in Buffett's eyes is the S&P 500, not other markets.
Overall, this story teaches us that choosing the right neighbor and investment strategy is the key to success, while also reminding us to be patient in investing and overcome human fear and greed.
This is despite the fact that the Nasdaq's index has outperformed the S&P 500 in the last 5 and 10 years. Of course, it may be because Buffett is older, he doesn't approve of the high-tech NASDAQ, he is more conservative.
His conservative attitude may have his own reasons. In fact, with so many cross-border ETF options now, from the current point of view, in addition to the S&P 500, there is probably only the Nasdaq 100 cross-border ETF that is worth owning for a long time. It's about the first story.
Gossip in the investment world: Mr. Hu's cutting of meat and the loss of fund managers
The second story is that has been circulating on the Internet recently, and although Hu Xijin, the former editor-in-chief of the Global Times, has done a lot of things after retirement, everyone has not paid much attention to it.
Recently, however, he has done something that has caught the attention of retail investors. He took out a part of the funds to buy A shares in several times. He famously said that he invested a total of 500,000 yuan, and if he lost 90% and only 50,000 yuan was left, he might jump off the building to tell everyone that he failed to speculate in stocks.
Of course, this sentence spread widely, and finally Hu Xi came in and out to clarify, and he said that he didn't know how there could be such a statement. Recently, he also announced his investment, he seems to have invested 500,000 recently, and recently lost more than 10%, with a loss of more than 60,000 and less than 70,000.
He used to have a saying that after Hu Xijin bought the stock speculation, he planned to put it for a few years, and he thought there should be no problem. Now it is rumored that a particularly optimistic stock commentator in Shenzhen told him, saying that your stock is placed there, and if you are mentally prepared, you will give it to your great-grandson.
This reminds me of Yugong moving mountains, it has a spirit, you have two generations, this mountain cannot be moved, but your children and grandchildren are endless, so sooner or later this mountain will be dug up.
At that time, some people persuaded those stock investors who were trapped, saying that it didn't matter if they were trapped, this generation could not be untied and passed on to their sons, and if their sons could not be untied, they would be passed on to their grandchildren, and even if their grandsons could not be untied, they would be passed on to their great-grandchildren, and for generations, as long as they were not exhausted, they would one day be untied.
Probably the stock critic in Shenzhen, who is particularly optimistic about a certain stock, also warned Lao Hu in the same way. However, Lao Hu may have decided under some kind of pressure, or he himself decided like this, according to what he recently revealed to everyone on the Internet, it seems that he recently cut some stocks and carried out the operation of cutting meat.
So now there is a saying that Lao Hu began to cut meat, which has become a gossip in the financial circles now. This is the second gossip.
The third gossip story is about some public fund managers who were super famous and smash hits back then. One of them, surnamed Cai, may be sentenced recently for breaking the law.
Of course, the sentence has not yet been finalized, and it seems that he is on parole pending trial until the verdict is made.
Will the fund manager surnamed Cai face jail time? This question has aroused everyone's attention. In addition, there is a female manager, surnamed Ge, who is no longer in the position of manager, why?
Because she lost a lot of money. As mentioned in the last episode, the manager has earned billions in subscription and management fees for the company, but the fund she manages has lost tens of billions in recent years. She used Kimin's money to generate profits for her company, and finally left her job. This is the case of the second manager.
The third manager is still working, and the manager, surnamed Zhang, has also been mentioned before. Someone counted that he lost tens of billions of dollars every year for three consecutive years.
For these fund managers of mutual funds, they are sought after by everyone when their performance is good, but in the end their careers may come to an end. Of course, these people may be able to invest on their own later. It remains to be seen whether they will be able to become managers again.
At the end of their careers, they left the market with one word: losses. Or two words: big loss.
Therefore, there are three financial gossip to share with you here. One is that Buffett's neighbor made a lot of money, the other is that our retired Mr. Wu began to cut meat, and the third gossip story is that the three fund managers left a loss.
Today's content is nothing more than to tell you that when you speculate on stocks, you don't have to trade every day. Now that we are about to enter April, and then we are about to enter May, there is a saying in the stock market called "five poor, six absolutely seven turn over".
However, as things stand, the U.S. stock market, especially across the Pacific, has been underperforming since April 1, and then there's been a lot of stuff going on one after another. I'll see if there's a chance to share more with you in the future.
Now to give you a piece of advice, as individual investors, we have to enter a state of rest earlier than the vast majority of people. So, today I will give you a piece of advice, and it's time to rest.
Author: Li Guangyi
Editor: Zhang Tianyi
Producer: Wang Junji
This article is the exclusive content of the WeChat public account of "CBN Broadcasting", please contact the background for authorization before reprinting. The individual stocks involved in this article are for reference only, and are not recommended for trading and are not responsible for personal income.