The index goes up and down, up and down.
After a year, Jin Yao finally realized that this was a bear market. It would not rise higher and higher like a bull market, and there would be no more buying opportunities.
On the contrary, there is always a relatively low point every six months, which makes it convenient for her to buy in batches.
Instead of constantly paying attention to stock market changes, it is better to concentrate on work as the system suggests, or to start a side business to make money and increase investment.
In just one year, Jin Yao deeply realized the benefits of buying index funds.
In the past, I didn’t notice it when looking back at historical data, but now, every time I make a fixed investment, I will record the PE and PB of the day. After a period of time, I will find that at the same valuation level, the fund price will indeed rise significantly.
At the beginning of the year, the fund paid dividends on time, with a dividend rate of approximately 4.2% of the purchase price.
Compared with historical data, the dividend amount is higher every year. As the system says, for the same PE, the larger the business scale, the more money you make every year.
"I seem to understand what the so-called fund is." Jin Yao murmured to himself.
A year-long investment note and account profits can better illustrate the problem than complicated theoretical explanations.
Yun Luo asked, "Do you really understand?"
Jin Yao nodded, "I've been reading books on financial management, browsing forums, and taking notes on my investments while practicing. I think I've gotten the hang of it."
Yun Luo: "It's no use talking big. Do a test and let me see if you understand it well enough."
"No problem." Jin Yao agreed solemnly, "Where is the test paper? Take it out."
Yun Luo: "Go to the forum and search as I said."
Jin Yao followed the instructions and found that the system was asking her to find a post. The poster wrote a long paragraph criticizing fixed investment, stocks, and index funds from various angles.
Yun Luo: "This is a typical negative example."
Yun Luo: "Host, please find the wrong views in the post and refute them one by one."
Yun Luo: "I will grade you based on your answer."
If you can accurately tell where others are wrong, it proves that the host has indeed mastered the knowledge point.
"Okay." Jin Yao took a deep breath and prepared to meet the challenge.
**
【Buying stocks is equivalent to gambling. 】
Jin Yao: “Wrong. Speculation is equivalent to gambling, while value investing is equivalent to becoming a shareholder of an excellent company and sharing the dividends of corporate growth.”
[If you hold stocks/funds for a long time, you will definitely encounter black swan events, so it is actually a gamble. ]
Jin Yao: “Wrong.”
"If there is a locust plague or epidemic in a certain year, it will only affect the economy of that year. Even if the national economic growth rate slows down, it is still growing."
"For example, last year, despite trade frictions at home and abroad, GDP increased by 6.3% year-on-year, which was generally stable and made steady progress."
"Buying an index is buying into the country's fortunes. As long as the country's economic situation is good, index funds will continue to hit new highs."
[Diversified investments consume more energy. When you don’t have enough money, you can get more benefits by focusing on your work.]
Jin Yao: "...In my last job, except for the time when I first joined the company, my income has remained stable at 5,000."
"Putting your energy into work will bring you greater benefits? Who said that? If you hit a career ceiling, the poster is responsible for a salary increase? The boss won't allow that anyway."
"Isn't diversified investment just about allocating some funds to money market funds and some funds to index funds? Why would it take so much effort?"
"Choose the target, make a good plan, and check the fund valuation once a week to see if it has entered the undervalued area. Invest regularly, and if not, take a rest this week. It's very simple and takes no more than five minutes."
[Buying stocks requires not only the ability to buy, but also the ability to sell. In the end, investors are often swayed by emotions and lose their rationality when chasing ups and downs. ]
Jin Yao: "Who says you have to sell after buying? There is a strategy called buy and hold, never sell."
"Anyway, a good index fund will pay dividends at the beginning of the year, starting with 4% interest per year, and then increasing year by year."
"Once you buy enough shares, the annual dividends will be enough to live on. The remaining money will grow with the net value of the fund, which will be enough to outperform inflation."
【The domestic stock market has been falling for a long time and soaring in the short term; the US stock market is relatively stable. In the same period of time, the domestic stock market has fallen more than it has risen. Compared with ten years ago, the market index has basically not changed, but the US stock market has been on a long bull run for ten years. This shows that the domestic stock market has no investment value. 】
Jin Yao: “Wrong.”
"From 2005 to 2019, the S&P 500 rose from 1,212 to 3,230. The CSI 300 rose from 1,000 to 4,096. If dividends are included, the gap is even greater."
"Over a long period of time, the domestic index has performed much better."
"The illusion is created because the U.S. stock market has been bullish for a long time, and it looks like the economy is thriving and all is well. In fact, unless the CSI 300 Index is obviously overvalued for a period of time, in most cases, if you buy and hold it for a long time, the CSI 300 will yield higher returns."
"On the one hand, my country is a developing country, with an economic growth of 6% in recent years and 8%-12% in the past. The United States is a developed country with slow economic growth, which has been maintained at 2%-3% for many years, and sometimes even negative growth."
"On the other hand, the long-term bull market means that valuations rarely fall to undervalued areas. The S&P 500 PE has long been hovering between 20-25, with a minimum of 13 and a maximum of 32. The CSI 300 PE has long been hovering between 10-15, with a minimum of 8 and a maximum of 50. There are many cheap buying opportunities."
"If you use the strategy of 'buy when low, sell when high' to buy index funds in the country, the returns will be even more amazing."
[The stock market always has "seven losses, two draws and one win". The money some people make is actually lost by others.]
Jin Yao: "Suppose there are 100 profitable companies in the market, with a total market value of 10 billion. Shareholders hold all of them and do not participate in buying and selling."
"Then a few years later, the company will develop and expand in size, with a total market value of 20 billion. All shareholders' shareholding ratios will remain the same, but their net worth will double."
"'Seven losses, two draws, and one win' is due to over-hype. Only a very small number of people can survive in the gambling game."
[Regular investment is a scam set up by fund companies to trick investors into buying fund products.]
Jin Yao: “Wrong.”
"Invest a fixed amount every month without any hesitation, and clear out your positions when the bull market comes. You can easily get a total return of 60%-70%, with an annualized return of 12%-15%."
“Invest when it is undervalued, stop buying when it is normally valued, and clear out when a bull market comes. The total return can easily double, with an annualized return of 17%-20%.”
"When browsing the forum, I saw other people's real-time fixed investment posts. I couldn't do it myself, but they insisted it was a scam."
"Even though it's hard to find real-life investment posts in China, Taiwan has a lot of fixed investment cases and related books. If you don't understand, forget it and study hard!"
…
Half an hour later, when the test was over, Jin Yao was still terrified. “The entire article was wrong. It was terrible.”
Yun Luo glanced at the host, "Does it look familiar?"
Jin Yao pursed her lips and did not answer.
Of course it looked familiar, and some of the ideas were exactly the same as what she had once held.
When she read the article, she seemed to see her past self, who clearly understood nothing but criticized a lot and believed that she was right.
Ignorance is fearless. This saying is so apt.
Unconsciously, Jin Yao recalled some bad memories. Almost instantly, she forced herself to change the subject, "How was your answer? Did you pass?"
Yun Luo: "I passed."
Yun Luo: "You already know what you need to know. Use this knowledge well. It will be enough for you to live a good life in the second half of your life."
Jin Yao was half excited and half depressed, "I didn't expect it to be so easy to learn."
"If you study hard for a year or two, you will be able to understand most of the knowledge."
"If I had known this, I should have contacted him when I first started working."
In this way, she would not have to step into the trap of company stock fraud. With 8.5 million, she has already achieved financial freedom.
Yun Luo: “The most difficult thing is not to learn or do it, but to have the willingness to learn financial management knowledge.”
Yun Luo: "Some people's financial situation is extremely bad from graduation to retirement, but they still don't realize this."
Yun Luo: "It's good that you can make up your mind to change."
"I used to think that at the age of 29, it was too late to do anything. Now I think it's too early to admit defeat at the age of 29," Jin Yao said with deep emotion. "I will slowly accumulate fund assets, and when the annual dividends are more than my salary, I will be completely free."
Yun Luo: "It's never too late to wake up. Good luck to you."
Hearing words that sounded like a farewell, Jin Yao was slightly startled, "Where are you going?"
"By the side of the next host." Yun Luo replied.
Come and go as you please, this system is too capricious. Jin Yao felt an inexplicable sense of reluctance.
She lowered her head and apologized earnestly, "I'm sorry for treating you so badly in the past. Also, thank you for teaching me how to manage my finances."
Yun Luo thought that this host was lucky and had encountered a good time. In the past, she would definitely not bother to care.
Now--
This is all common sense, how come some people don't know this?
How can you not even understand the most basic things?
How did he live to this age in peace and security with almost no financial knowledge?
It turns out that the majority of people are financial novices, and only a few have basic common sense, so it is too difficult to build a system.
…
The bottom line is being lowered little by little.
As for the rebellious attitude, the refusal to listen to advice, the stubbornness to fall into traps... before enlightenment, who didn't have a dark history like that of an idiot?
"I'm leaving." After saying this, Yun Luo left in a leisurely manner.
**
【Extra】
After the system left, Jin Yao strictly followed the plan, regularly buying dividend funds when the valuation was low, and stopping buying when the valuation was high, and depositing the money in the bank.
A year has passed.
I allocated 50:50 between dividend funds and money market funds. The dividends at the beginning of the year plus the interest on the money market funds totaled nearly two thousand.
Jin Yao kept the money and didn't spend it, looking for an opportunity to continue investing.
Two years have passed.
Jin Yao kept her spending habits unchanged, continued to save money, and bought fund shares whenever she had the chance.
On the first day of the new year, I calculated that the dividends from the bonus fund were 1,700, and the interest from the money fund was 1,000. The two incomes added together were almost half a month's salary.
"The method is right, but the capital is too little." Jin Yao thought hard, "How about taking a part-time job, or learning how to open an online store?"
Thinking about her friends working abroad, she simply opened an online store specializing in purchasing on behalf of others.
Five years have passed.
Jin Yao accidentally seized the opportunity of the times and her purchasing business grew bigger and bigger. Even if she shared the profits with her friends, she still made 120,000 to 150,000 yuan in net profit each year.
She didn't spend a penny of the money, but saved it all, using half to buy money funds and the other half to buy dividend funds.
Gradually, the fund shares increased, and the annual dividend was 15,000 yuan. Add to that the interest of the money fund of 10,000 yuan per year, and the passive income exceeded 25,000 yuan.
At this time, even if you lose your job, it will not affect your life.
It happened that Jin Yao was tired of the workplace, so she simply quit her job and concentrated on her career.
At the age of 29, I have no car, no house, and no boyfriend, and I feel very anxious.
At the age of 35, she still has no car, no house and no boyfriend. But this time, Jin Yao is optimistic and doesn't care at all.
In the past, she wanted to get married, partly to reassure her parents, partly because she was working in the company and didn’t want to be talked about. Also, life was too hard and she wanted someone to share the burden with her.
Now, her parents left her alone because they couldn't persuade her. She quit her job and no longer heard gossip. She could live well on her own. Whether or not she should find a partner was no longer important.
If she meets someone she is destined to be with, they will live together. If she doesn't, she can live happily on her own.
This is the confidence that money gives her.
**
Although her life was happy and carefree, Jin Yao sometimes still wondered if she had woken up earlier.
The earlier you start planning, the more assets you accumulate and the easier your life will be. But she, after all, acted a little late.
"Oh, by the way," Jin Yao suddenly remembered, "how is the company's stock doing? Has it been delisted?"
After leaving xx Technology Company, she was afraid of being sad and blaming herself, and continued to be immersed in negative emotions, so she deliberately forgot about the related things.
Looking back now, I realize that several years have passed.
Jin Yao was extremely curious, so she searched online and quickly found relevant reports.
The company ultimately failed due to fraud, scandals, and lack of access to loans.
The stock was suspended and resumed several times, and finally the stock was delisted and the company went bankrupt.
An investor sued the company for compensation for losses. However, the lawsuit has been going on for two years without any result, and it is unknown how long it will take to resolve the issue.
From the perspective of an outsider, Jin Yao could see clearly that even if she won the lawsuit in the future, the energy and time she had spent over the years would not be recovered.
"This is a mess! Get out early and cut your losses in time so you don't get sucked deeper!"
Jin Yao was extremely glad that she had listened to the system's advice. Although it was not too early to leave, it was better than leaving until the end and getting heavily in debt.
Looking back on her experiences over the years, she sighed, "People should do more right things. If you always get involved in trouble, your life will not be good."
The author has something to say:
The test questions come from the comments.
**
Currently, there are very few funds in China that pay fixed dividends every year.
If there is no dividend, it is equivalent to reinvesting the dividend.
For example, the fund price is 1.15 and the dividend is 0.05.
After the dividend, the investor received 0.05 and the net value of the fund became 1.1.
No dividends, the fund’s net value is 1.15.
Although a part of it is distributed and the total amount remains unchanged, it seems like a word game, but dividends are more valued abroad.
Because after the dividends, investors can use the money to live, which is more conducive to long-term holding.
Some people also say that index dividends are like eggs laid by an old hen. A hen worth 100 yuan lays eggs worth 4 yuan every year, which continue to increase in value.
**
If you can understand it, read it. If you can't, forget it and don't force yourself. Just treat it as expanding your knowledge and extracurricular reading.
Check out Taiwan’s fixed investment godmother Xiao Bi Yan, she’s very impressive, with an annualized return of 20%+.
**
There are many strategies for regular investment.
[One is to take profit but not stop loss, and sell when the valuation is high. ]
How to tell whether the valuation is high or not? There is a column called "PE percentile" in the Egg Roll Index valuation. That is, where the current PE ranks among all PEs since the data was available.
If it is lower than 20%, it indicates undervaluation. (Historically, 20% of the time it is lower than the current valuation)
Above 80%, it indicates overvaluation. (Historically, 80% of the time it is lower than the current valuation)
[There are also commonly used data. ]
In recent years, for the SSE Dividend Index and the CSI Dividend Index, PE < 10 is undervalued, and PE > 15 is overvalued.
You can make fine adjustments based on the public standards and according to your own situation. (For example, set it to buy when PE < 9, and buy when PE < 8)
[Another option is to buy and hold for a long time, and live on the dividends. ]
This means not making money from the valuation difference of buying low and selling high, but only making money from the development of the company.
[In short, the eight immortals cross the sea, each showing their magical powers. It is a good thing to be able to make money, regardless of the strategy/means]
**
[There is a book called "You Can Be Rich Without Working", the author saves money to buy index funds, and then lives on the dividends every year]
[Buying for dividends is a common strategy for investment funds in Hong Kong, Taiwan, and the United States. There are obvious undervalued and overvalued areas in China, which are more suitable for short-term trading. Few people hold for the long term.]
[Using the US buy-and-hold strategy to buy index funds in China (undervalued areas) will yield higher returns. It has been proven to be effective. ]
[If you want to test the waters, there is a way. Take 1,000 yuan to buy the dividend ETF (code 510880). Record the PE valuation when you buy it this year. Wait until the same PE valuation next year and calculate the return. ]
[Why do we strongly recommend the buy-and-hold strategy? Because it is simple, convenient and easy to operate. If you buy with a fixed investment of PE < 8 and hold for a long time, the annualized return is expected to exceed 12%, which is much more reliable than spending all your money to buy P2P. ]
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