Two months to earn 50percent are you floating? Its not that easy to invest

category:Finance
 Two months to earn 50percent are you floating? Its not that easy to invest


Risk of overvaluation

Its fun to earn 50% in two months. Whats the concept? 50% seems to be not much, but under the effect of compound interest, it is amazing. If earn 50% in two months continues for three years, the investment principal will expand 1478 times. Yes, youre right. One yuan will become 1478 yuan, one million yuan will become nearly 1.5 billion yuan, and the principal of one apartment will become nearly 1500 suites. According to 10 houses on each floor, its a 15 story building. If it lasts for five years, the principal will expand nearly 200000 times. If making 50% in two months is a sustainable thing, all the businesses in the world will be eclipsed in front of it, the business laws will be trampled, and the wealth created by peoples hard work and wisdom will not be worth mentioning by comparison.

It should be noted that such a huge wealth effect is accompanied by a high valuation. Take the two indexes mentioned earlier for example. According to the data of wind information, the semiconductor industry index of China Securities reached the valuation of 6.3 times Pb and 144 times PE on February 25, while the semiconductor chip of China Securities reached the valuation of 175 times PE and 9.9 times Pb on the same day. Such a high valuation often brings long-term risks.

Those who confuse people will have similar things. The most puzzling things are not things that are very different and have not been seen at all, but things that look similar. Although the price rise of 50% in two months is unlikely to be sustained, and it often brings high valuation and high risk, it does not necessarily mean that there must be risk, especially when the market starts to rise and the valuation of assets is not too expensive.

Take the S & P 500 index of the United States on August 12, 1982 as an example. On that day, the S & P 500 index closed at 102 points. Just two months later, on October 12, the index rose to 134 points, or 31%. Is it up 31% in two months that investors should sell? But not so: from October 12, 1982 to 2000, the S & P 500 index went out of a bull market for nearly 20 years, and finally reached a maximum of 1553 points in 2000. If an investor sold the S & P 500 index on October 12, 1982 just because the market has risen 31% in two months, he would miss the super bull market for more than ten years. But what investors should also see is that an important factor supporting the S & P 500s surge in this period is the over undervalued value of the previous index.

Before the bull market, the S & P 500 was valued at about seven times PE. An important factor in this valuation is the long bear market. In 1972, the S & P 500 peaked at 120: nearly 20% higher than 102 on August 12, 1982, a decade later. It is because of this long 10-year bear market that the S & P 500 index started a bull market in 1982 based on ultra-low valuation.

Its not that easy to invest

However, this bull market is not for every investor to enjoy. Investment is a real toss.

If investors believe that they can earn 50% in two months and invest like this in the future, it is undoubtedly wrong, because it is impossible to make 50% in two months. If investors mechanically learn the investment method of judging risk by price rise, and think that as long as the assets that have risen by dozens of percentage points in a short term, they will plummet, it is also wrong. In such a bull market from 1982 to 2000, such investors will be washed out early and will not get the most lucrative returns on the stock market.

If investors make tens of percent in two months, plus a high valuation after that, can they judge that this asset must have no investment value? Unfortunately, the capital market is a place with fixed internal philosophy but never fixed external moves. If any value investor cant analyze every case carefully and speculate with the philosophy of good and cheap of value investment, but simply apply some dogmas, he cant see the whole picture.

Take Hong Kong listed Tencent Holdings (00700) as an example. From August 17, 2007 to October 30, 2007, Tencent Holdings share price rose from a minimum of 5.51 yuan (data of resumption of rights before February 28, 2020, the same below) to a maximum of 14.08 yuan, or more than 150%. On October 30, 2007, Tencents valuation was 29 times Pb and 104 times PE. On October 30, 2007, Tencent holdings absolutely met the two standards of excessive short-term growth and overvalued. At first glance, it seems to meet the criteria of accumulating great risks. However, Tencent holdings enterprise qualification is really excellent. At that time, roe reached nearly 30%, and remained at a similar level for many years. As a result, Tencents share price increased by 399 yuan on February 28, 2020 from 14 yuan on October 30, 2007.

For value investment, as long as the investment can be infinitely close to the optimal state under the two standards of good and cheap, any external rules and regulations can be challenged. When an asset is cheap enough, good doesnt matter. And if you can really determine that an asset is good enough, then it can not be cheap. However, although the highest level is wonderful, not every investor can achieve it. This is just like a primary school student who just learned the basic Chinese wanted to write another general knowledge of capital governance. A fighter who just learned three months felt that he could play the world competition of MMA comprehensive fighting, is undoubtedly unrealistic. For those investors who see that they have made 50% in two months, they feel that they can make a fortune by relying on the capital market, but they do not know all aspects of knowledge in the capital market, and their understanding and experience of the market are almost limited to stocks and funds have risen 50% in the last two months, the risks they face are undoubtedly huge. (the author is chief investment officer of Jiuyuan Qingquan Technology) source: responsible editor of Securities Times: Yang bin_nf4368

For value investment, as long as the investment can be infinitely close to the optimal state under the two standards of good and cheap, any external rules and regulations can be challenged. When an asset is cheap enough, good doesnt matter. And if you can really determine that an asset is good enough, then it can not be cheap.

However, although the highest level is wonderful, not every investor can achieve it. This is just like a primary school student who just learned the basic Chinese wanted to write another general knowledge of capital governance. A fighter who just learned three months felt that he could play the world competition of MMA comprehensive fighting, is undoubtedly unrealistic. For those investors who see that they have made 50% in two months, they feel that they can make a fortune by relying on the capital market, but they do not know all aspects of knowledge in the capital market, and their understanding and experience of the market are almost limited to stocks and funds have risen 50% in the last two months, the risks they face are undoubtedly huge.