Chapter 46: Creating a Simple Portfolio
"Xinyue, you should pay attention to China Merchants Bank next." Li Feng continued.
Zhao Xinyue blinked and asked, "Why China Merchants Bank? Not Minsheng Bank?"
Li Feng stood up, looked out the window at the clouds floating in the sky, and said slowly:
"Because the market conditions ahead will be the most brutal in a bear market, I can't see what the future holds, and there will no longer be a strong market to cover our bills. Therefore, we can no longer buy into Minsheng Bank, which is the most popular. We can only adopt the most conservative strategy, which is to stick with the best companies."
"We all know that low risk means low profit, while high risk means high profit. Banks are businesses that manage risk. Only by keeping deposit costs low enough can we lower the risk of projects and avoid touching high-risk projects."
"Remember! China Merchants Bank's core competitiveness lies in its deposit costs, which are comparable to those of the Big Four banks. All your research should revolve around this. If its deposit costs ever become mediocre, that will be the beginning of its complete mediocrity. As long as it can protect this moat, it will always be the best bank."
In the stock market, there are sometimes moments of low risk and high returns. Such opportunities are generally extremely rare and unknown.
Once experienced stock investors discover such an opportunity, they will take strong action and often make astonishing profits.
This risk-return ratio is an important basis for investors to make decisions.
While listening, Zhao Xinyue took out a piece of paper and wrote down everything, including the names of the four major banks and four small banks that he was familiar with.
Just after she finished writing, she suddenly came to her senses and asked:
"Aren't we investing in Kweichow Moutai? Why are we researching bank stocks again?"
Li Feng said:
"Today is different from previous years. With a larger fund size, we need to properly build an investment portfolio to reduce investment risks. Generally speaking, we should buy at least two stocks in two different industries."
"So, you chose Kweichow Moutai and China Merchants Bank?!" Lin Menghan interrupted.
"That's right," Li Feng continued. "These two companies, one in the consumer sector and the other in the banking sector, can effectively reduce the volatility of our investments and diversify our investment risks. Xinyue, please download the quarterly and annual financial statements for these two companies first."
A simple investment portfolio is to choose three or five stocks from different industries and diversify your investments.
A complex investment portfolio may also include investments and hedging in bonds, cash, stocks, and even options and foreign exchange.
For us ordinary investors, it is enough to study three or five major industries and choose three or five stocks.
"Then...where can I download the bank stock report?"
Zhao Xinyue looked at the names of several bank stocks written on the paper and felt a little worried.
"It's easy. Just go to the exchange and download it...all the previous years are available..." Li Feng took the mouse from Zhao Xinyue's hand and clicked on the stock exchange page.
After a while, dozens of reports landed on the computer desktop.
Looking at the densely packed documents, Zhao Xinyue frowned tightly.
Li Feng saw it and comforted him:
"Xinyue, the best way to understand a person is to look at his files. The best way to study a company is to look at its financial statements over the years and compare them with its daily words, deeds, and strategies..."
"I once said that investing is like war. Only by understanding your opponent can you know yourself and your enemy, and win every battle. In value investing, your counterparty is the company. You must ensure that the company you invest in can provide you with a good night's sleep and make you money day by day."
"Only in this way can you be responsible for the funds in your hands and increase the success rate of your investment."
Upon hearing this, Zhao Xinyue relaxed her brows, sat quietly in the chair, and clicked on the 2012 third quarter report of China Merchants Bank.
Lin Menghan frowned and downloaded Kweichow Moutai's financial statements over the years, trying out this investment method he had just come across.
Li Feng took a sip of tea and turned on his computer. He had just studied stocks for a while when a faint fragrance entered his mind.
He turned his head and saw beads of sweat on Lin Menghan's forehead. Her cheeks were red, showing a charming charm. This made him think of the scene of Lin Menghan sleepwalking years ago.
This made him feel a little anxious.
Li Feng stood up and stood by the window to calm down. He said casually, "Xinyue, this room is too small. Let's move to a two-bedroom, one-living room room. One room can be used as a bedroom, and the other can be converted into a trading room."
"Okay, find some time to ask Master Zang if there is anything suitable in their community." Zhao Xinyue replied.
"Well, I'll give it a call and ask."
Li Feng took out his phone and was about to dial.
Lin Menghan rolled her eyes and said, "Xinyue, my dad's friend happened to open a technology park nearby. I'd like to see if I can borrow an office there."
"Really? Does it cost money?" Zhao Xinyue asked.
"I don't think so." Lin Menghan replied.
Li Feng turned his head and saw Lin Menghan took out her cell phone and walked into the bedroom with her long straight legs.
A burst of murmurs followed.
Zhao Xinyue looked at the report for a while, got bored, and went into the bedroom to listen.
The office rental went quite smoothly.
A few months later, Li Feng moved all the computers into the Honggu High-tech Building two stops away.
The building has 33 floors, with glass curtain walls on the outside and marble on the inside, making it look very high-end. Li Feng's trading room is on the 14th floor.
The trading room is about ten square meters, which is more than enough to accommodate three computer desks, a sofa, a coffee table, and several pots of green plants.
Thanks to Lin Menghan's relationship, he only paid a symbolic rent of one thousand yuan.
These few months.
The Shanghai Composite Index slowly and steadily fell from around 2,300 points in March to around 2,100 points in May, and rebounded to around 2,300 by the end of the month...
The stock market is in a mess.
Stock investors sighed.
The imaginary bull came and went, taking away the wealth of countless investors.
Li Feng sat in the computer chair, looking at the slowly falling Shanghai Composite Index curve. What he saw was the release of bad news and the slowly approaching opportunity.
In a bear market, good investment opportunities and opportunities worth trading are extremely rare, very short-lived, and often unknown to the public.
Only if you are very patient can you get what you want.
Finally, in June, a "money shortage" broke out among banks.
The overnight interbank lending rate soared from around 8% to around 11%!
The huge bad news was like an aerial bomb thrown into the stock forum, instantly causing a huge wave!
"The bank has no money to lend?!"
"Rumor has it, a large bank has defaulted!"
"What?! The bank defaulted?! Is this true?!"
"Absolutely true!"
"Not only are banks out of money, but the Federal Reserve has also decided to exit QE early, so there's a shortage of money."
"Global stock markets are plummeting, commodities are falling, foreign exchange is depreciating, run, run..."
All kinds of rumors spread in various stock forums, with different versions constantly updated, causing waves of panic and triggering stampedes again and again.
The Shanghai Composite Index started at 2,300 points in June, and then plummeted 150 points in six days. After a slight adjustment for four days, two big negative lines came down again, directly breaking through 2,000 points!
The lowest point was 1849 points.
The battle to defend 2000 points has begun again!
The stock investors groaned and wailed, as if the same thing happened last year again.
"Buy it!" Li Feng made the final decision.
"Which one to buy?" Lin Menghan sat aside, opened the stock trading software and asked.
Today, Lin Menghan wore a black slim suit with a skirt underneath. Her long legs hung down from the chair, making people feel dizzy.
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