To The Moon

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From the beginning of 2021 to the beginning of 2022, Chinese concept stocks in the American stock market encountered an unprecedented crisis.

Take a look at the trend of China Stock ETF and know how tragic this is:$Invesco Golden Dragon China ETF(PGJ)$​

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In this round of stock market collapse, countless people's beliefs collapsed, their wealth was shattered, and even their health was poor.

Therefore, we should summarize and reflect to avoid the recurrence of the tragedy.

Some investors concluded that this crisis has taught him four lessons:

Non-financial factor risk, guard against high growth risk, attach importance to valuation and defensive investment.

Non-financial factor risk:

It refers to risks other than finance. For example, the "double reduction" policy, Internet anti-monopoly, the conflict between Russia and Ukraine, and the influence of American regulators on China Stocks, and so on. These factors span people's livelihood, policy, society and international politics, and many of them are not purely financial factors. But their impact on the stock market is even greater than the financial factors themselves.

Beware of high growth risks:

High-growth companies are easily sought after by capital, but they face two big problems:

1. Many enterprises' revenues have increased, but their profits have not increased simultaneously. Once the industry encounters headwinds, this "nominal" high growth will lead to a serious test of the stock price of enterprises. For example, LeTV once relied on a large number of subsidies to gain huge growth rate and market share, but this growth rate disappeared immediately after the subsidy ended. The network car industry is similar.$DiDi Global Inc.(DIDI)$​
2. The current fast-growing industry does not mean that when the industry matures, it will be rewarded with high profits. For example, around 2020, chain hot pot will become a high-growth industry. However, when this industry moves from emerging to mature, the profit rate returned is not in the same dimension as their previous growth rate.$HAIDILAO(06862)$​

Valuation is important

When the market is the most enthusiastic and gives the highest valuation, it is often the most dangerous. Because, when the market is pessimistic, the higher the valuation, the bigger the bubble, so there is more room for decline.

Investment needs to pay attention to defense

Anything extreme doesn't seem to happen at first. And only after they really happen will people find that everything is logical. Therefore, we should always pay attention to the prevention of risks in investment:

• For enterprise selection, investors should not put all their positions on enterprises with high-speed growth, weak profitability and unstable industry structure, but also give due consideration to some relatively stable industries and enterprises with reasonable valuation, such as airports, ports, electric power, sewage treatment, banking and tourism.
• As far as capital attributes are concerned, investors should refuse to bear excessive leverage. For any investment style, spring, summer, autumn and winter will come alternately, so it is necessary to ensure that there are enough safety cushions to survive the coldest winter.

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Finally, let's talk:

• What have you learned from the stock crisis?

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