Three possible ways of traversing Bull and Bear Market

Method 1: stock selection

Introduction:

Specifically, it is to choose stocks that can traverse bulls and bears, and thenLong-term holding, in the middle can also, adjust the position to exchange shares.

Advantages:

1. It is possible to achieve better long-term excess returns.

2. Low cost.

Disadvantages:

1. The fluctuation is huge.

2. The applicable population is narrow, so it is only suitable for investors with strong stock selection ability, and most investors lack stock selection ability.

Method 2: asset allocation and dynamic rebalancing of stock and debt

Introduction:

The simplest asset allocation model is dynamic rebalancing of stock and debt.

To put it simply, stocks and bonds are allocated 50% each at the beginning, and a threshold is set for the degree of deviation, which is rebalanced after the threshold is triggered.

Take Chestnut, for example, suppose you set a threshold of 20%, then when the stock market soars and the proportion of equity assets reaches 60% of the total position, you have to sell equity assets and buy bond assets.To restore the allocation ratio of stock and bond assets to 50%, 50%, 50%.

When the stock market plummets, the operation is similar, but in the opposite direction, you should buy stocks and sell bonds.

In this model, there is no need for any prediction at all, as long as the established investment plan is firmly implemented, it can be realized automatically.Reduce positions at the high level of the stock market and increase positions at the low level of the stock market, which in turn can pass through bulls and bears.

Advantages:

1. The method is simple and easy to learn.

2. Steady income can be realized.

Disadvantages:

1. It is difficult to obtain excess income.

Method 3: derivatives hedging

Introduction:

This method is often used by professional investors.The most common operation is to hold stocks while shorting stock index futures or buying put options.

Advantages:

1. The fluctuation of position is small.

2. To a certain extent, the income of stock selection can be strengthened, and the excess return can be more obvious.

Disadvantages:

1. The cost of hedging is high.

2. If hedging is improper, it is possible to hit the face from left to right.

3. High investment threshold and high professional requirements, which is only applicable to institutional and professional investors.

Conclusion

For amateur investors, doing a good job in asset allocation and dynamically balancing the proportion of stock and debt holdings is a more feasible way to cross the bull and bear.For institutional investors, selecting stocks and hedging when necessary is a more feasible approach, which can take into account both excess returns and clients' investment experience.

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