To ask, is the matter of investment complicated in the end? I think many people's answer is in the affirmative.

Indeed, macroscopically, it may involve national politics, economy, history and military; from the meso point of view, it involves the evolution of industry pattern, the progress of industrial technology, and the changes of upstream and downstream industrial chain; microscopically, it involves enterprise development strategy, corporate governance, management quality, financial situation, product innovation, marketing strategy and so on.

In this way, in order to invest, you need to study finance, economics, psychology, accounting, statistics, sociology, business management. There is probably no one here who wants to invest any more.

So, is there any simple and feasible law that can directly touch the nature of investment? Can we leave the complex factors that we can't grasp to God and only do the simplest things we can grasp?

The answer lies in the book "the simplest thing in investing". The author Qiu Guolu is the founder of Gao Yi Capital. In his book, he describes his experience from an amateur stock speculator to a professional investor over the past 22 years.

01 Reverse investment is the simplest way to invest.

Aggregators in any field have a strong ability of reverse thinking, especially in the field of investment.

George Soros said: everything has its ups and downs, and after a great good comes a great bad.

Charlie Munger said: think backwards, you have to think backwards.

Buffett said: I am greedy when others are afraid, and I am afraid when others are greedy.

Most of these famous quotes have been heard by you, but you may not know what they mean. These investment quotes point to the same rule: reverse investment. The author of this book mentioned that it was only after more than a decade of his own investment that he deeply realized that reverse investment was an important source of excess returns.

Take the announcement of car purchase restrictions in Guangzhou in 2012 as an example, car stocks plunged on the same day, and the falling stock prices overreacted the panic. In fact, the purchase restrictions in a city could not change the overall demand. The overall market fell over the next six months, while auto stocks rose by an average of 30% against the market. In addition, construction machinery in 2010, banks in 2011 and real estate in 2012 have repeatedly confirmed the effectiveness of "reverse investment".

Reverse investment is the simplest and least easy way to learn, because it is not a skill, but a character-character cannot be learned and can only be honed through practice.

• Are falling stocks worth investing in the opposite direction?

Not everyone is suitable for reverse investment, and not all plummeting stocks are worth buying.

What kind of stock is worth investing in reverse when it falls? The key is to look at three standards.

First, look at whether valuations are low enough and whether they have overreflected possible bad news.

Stocks with high valuations have a lot of room for downside, and there is also a lot of room for such stocks to fall in the future, so the decline is generally long and large, so it is not appropriate to invest in the opposite direction at the beginning of the slump.

Second, to see whether the problems encountered are short-term and solvable.

For example, retail stocks are facing the impact of online shopping, the loss of the advantages of the old business district caused by the new urban complex, and the rise in rental and labor costs to compress profit margins, all of which can not be solved in the short term.

Finally, see whether the collapse in the share price itself will worsen the fundamentals of the company.

The fall in the share prices of Bear Stearns and Lehman led directly to a downgrade of bond ratings and margin calls from counterparties, and the knock-on effect of this negative feedback was not suitable for reverse investment.

Unlike Bank of China Ltd. 's industry, the Central Economic work Conference once pointed out that "firmly adhere to the bottom line that systemic and regional financial risks will not occur." therefore, there is an implicit guarantee at the government level, and there is no such deterioration, so reverse investment can be made.

The above three criteria can bring you not only to judge whether you can buy in the event of a fall, but also to expand to whether the stock is usually worth buying.

Some stocks, you have a position, but when you fall, you do not panic at all, and even hope that it will fall a little more so that you can increase your position, this is because you already know enough about the stock, and only if you really recognize it, the fluctuations in the market price will not affect your mood.

For these stocks, the decline just provides a better buying point-the calm after buying comes from the analysis before buying.

• Which industries are suitable for reverse investment?

Not every industry is suitable for reverse investment.

Non-ferrous coal and other industries such as non-ferrous coal had better follow the trend. Sunset industries such as steel may be value traps, and fast-changing industries such as computers, communications and electronics are also not suitable for falling and buying.

Food and beverage, by contrast, is an area suitable for reverse investment.

As consumers, we certainly abhor food safety accidents. But as investors, food safety accidents are often a good opportunity to build positions, especially those industry leading enterprises that are not directly involved in safety accidents.

When faced with reverse investment opportunities such as food safety events, consider the following questions:

(1) are there any substitutes? If there are alternatives, be cautious; if there are no alternatives, be positive. When consumers have no other choice, it is only a matter of time before the brand rises again.

(2) is it a stock problem or an industry problem? If it is a stock problem, avoid the individual stocks involved and focus on its competitors, even if it is an industry problem (such as tainted milk powder), you can also focus on the stocks that are relatively less affected.

(3) should we take the initiative to add illegal elements or "get shot passively"? The former needs to be cautious, while the latter can be positive.

(4) is the problem easy to solve? If it is easy to solve, it is positive; if it is difficult to solve, the negative effects last for a long time and need to be cautious. Melamine is an example.

(5) does the enterprise involved have a solid foundation, a long history and a wide brand reputation? These factors often play a decisive role in times of crisis.

(VI) are there any outstanding cases of victims? This determines whether the impact of the incident on consumers is lasting.

Through these six rhetorical questions, we can basically select the reverse investment opportunities in the food sector.

• What are the defects of reverse investment?

Any investment method has defects, and reverse investment is no exception.

The deficiency of reverse investment will inevitably sell or buy too early.

If you sell early, you will miss the last madness of the hot industry; if you buy early, you will suffer the last fall of the unpopular industry. It is a necessary quality for reverse investors to survive at this time. You and I must understand that no one in the market can accurately sell at the highest point and buy at the lowest point.Never try to earn every penny in the market.

In the bull market in 2007, for example, even if the index later rose to 6100, it was lucky to be able to ship above 4000. In the 2008 bear market, even if the index later fell to 1664, it was lucky to be able to build a position at 2000.

The top and bottom are just one area, so don't hesitate to reverse it.Do not care about the gains and losses of the last fall in the short term, as long as you can have the last laugh, why not have a hard time in the short term? Only investors who can survive are suitable for reverse investment.

In the A-share market, which is eager for quick success and quick profit, there are fewer people who are willing to endure, so reverse investment will still be an important source of excess returns in the future.

02 Value Investment and Investment risk

"value investment" is a recognized good idea, but many people do not really understand the connotation of value investment. Value investment is a job to compete with internal forces, which requires the practice of refining into steel and keen insight.

• Guard against value traps

The first pit of value investment is the value trap.

The so-called value trap refers to stocks that should not be bought no matter how cheap they are, because their deteriorating fundamentals will make stocks more and more expensive, not cheaper.

Which stocks are prone to value traps? Pay attention to avoid the following five categories.

The first category: those who have been eliminated by technological progress.

The future profits of such stocks are likely to decline or even disappear year by year, even if the price-to-earnings ratio is low. For example, the impact of digital cameras on Kodak, this example is the standard value trap. We need to be particularly cautious about industries where technology is changing rapidly.

The second category: small companies in the winner-take-all industry.

The so-called winner-takes-all is an industry with a high degree of concentration. In these industries, the advantages of leading companies will only become more and more obvious. At this time, small stocks in the industry, no matter how cheap they are, can be a value trap.

The third category: scattered, asset-heavy sunset industries.

The sunset industry means that the demand of the industry is no longer growing. Heavy assets means that even if demand does not grow, its production capacity cannot be withdrawn. Decentralization means that when supply exceeds demand, it will face disorderly competition or even price war. The cheapness of such stocks is an illusion because their profits are likely to go from bad to worse.

The fourth category: periodic stocks at the top of the boom.

Cyclical stocks with low price-to-earnings ratios are also often value traps in the late stages of economic expansion, when peak profits are unsustainable. So cyclical stocks can sometimes refer to valuation indicators such as price-to-book ratio and price-to-sales ratio, buy at high price-to-earnings ratio (profit trough) and sell at low price-to-earnings ratio (profit peak). In addition, trading cycle stocks must be combined with top-down macro analysis, not just bottom-up stock selection.

The fifth category: accounting fraudulent companies.

Accounting fraud is not unique to value stocks, and fraud is more common in growth stocks.

The commonness of the above value traps is that profits are unsustainable. Therefore, the current bargain is only superficial, and it will not be cheap after further deterioration of the fundamentals.

Investment can be easy as long as you can avoid the value trap. Find a good cheap company, buy and hold it until the stock price is no longer cheap, or when you find that the quality of the company is not as good as you thought.

• Re-recognize the risk

The second pit of value investment is the misunderstanding of risk.

People often say that high risk and high return, low risk and low return. In fact, the risk is often out of proportion to the return.

Successful investments bear only those "fake" risks that have been exposed, felt by everyone, with corresponding risk discounts, but with little real risk.

The ability to correctly distinguish risks is an important driving force of decision-making. Once you take the real risk, you can't rest easy on your investment.

Common investment risks can be seen from two angles.

First, the perceived risk and the real risk.

From this point of view, the risk can be divided into two kinds, one is the perceived risk, the other is the real risk.

After the stock skyrocketed, the real risk rose, but the perceived risk decreased. At the most dangerous time in the stock market at 6000 points, people felt that the song and dance were on the rise and that they would continue to rise.

After the stock plummeted, the real risk decreased and the perceived risk rised. when the stock market was very undervalued at 2000 points, many people felt that the stock market would fall indefinitely.

Second, the risk of price fluctuations and the risk of permanent loss of principal.

When the market is more than 5000 points, the stock price "every day up", calm, the risk of price fluctuations seems small, but the risk of permanent loss of principal is very great.

When the market is at 2000, the stock price "falls endlessly", the waves are rough, and the risk of price volatility seems to be great, but the risk of permanent loss of principal has sharply reduced.

Most people do not really understand the matter of investment, often cut positions at the bottom, but flock to the high positions.

The bottom of the market is often regarded as the time when the market is most volatile, and most people have a weak ability to bear the risk of stock price volatility, and confuse the temporary volatility risk at the bottom of the market with the risk of permanent loss of principal.

In fact, in the process of falling stock prices, the risk of short-term fluctuations in stock prices is increasing, and the risk of permanent loss of principal is decreasing. Many people only see the first kind of risk, so they chase the rise and fall, clear the stock at the lowest point, to catch up with the enterprises that have been rising for a long time, in fact, the second kind of risk is the real risk.

• Three conditions of value Investment

Value investment has its specific scope and conditions of application, and understanding its limitations is the premise of the correct application of this concept.

(1) the intrinsic value of the company is relatively easy to determine.

We know that value investment is to buy when the stock price is lower than the intrinsic value of the company and sell when the stock price is higher than the intrinsic value.

Why does Buffett only buy companies that have a simple business model and are closely related to people's daily lives? Such as Coca-Cola Company, Procter & Gamble Co, Gillette Blade and Green Arrow chewing gum.

Because the future earnings growth of these companies is very stable, their intrinsic value can be easily determined.

(2) the intrinsic value of the company is relatively independent of the stock price.

Companies like Coca-Cola Company and Procter & Gamble Co, no matter how the stock price falls, will not affect the normal development of the company's business.

On the contrary, some companies, such as Bear Stearns and Lehman, have a direct impact on their business once their share prices plunge. Once share prices fall by more than a certain extent, a large number of hedge funds stop trading with them and run on them. In this case, the intrinsic value of the company will evaporate overnight.

(3) appropriate market stage and appropriate investment period.

There is a fair conclusion about the market stage: the first half of the bull market is more suitable for value investors.

At the beginning of the bull market, pessimism was pervasive and many stocks were seriously undervalued, and this was a good time for value investors to show their strength.

In the second half, the valuation moves from a reasonable level to an overvaluation, and die-hard value investors are often wary of the stock market bubble and come out in advance, on the contrary, trend investors are more able to adapt to the trend.

Of course, if you have a maturity of more than 10 years, you don't have to worry about the market stage, because 10 years is enough to span the bull-bear market cycle.

As for the investment period, we need to pay attention to the prerequisite for realizing the return of value investment, that is, the stock price will be close to its intrinsic value.

However, in the stock market, it is normal for the price to deviate from the value, and it often takes a long time for the price to return to the value. Therefore, value investment is generally more suitable for long-term investment. Because it takes a process for the market to admit mistakes, it is difficult to wait for the value of the market recognition reaction in a short period of time.Price investment is not equal to long-term investment, but it often takes a long time for the market to reflect value.

These are the three conditions and limitations of value investment.

When we talk about the limitations of value investment, we do not mean to belittle it. Any investment method, only by understanding its limitations, can improve the effectiveness of the application.

03 Always beware of human weakness

In investment, investors need to beware of many things, the most important of which is to beware of themselves. Because investment reflects your true temperament and values. Everyone has human weaknesses, which are enough to make your investment go short.

First of all, beware of overconfidence.

The author mentions an interesting statistic at the end of the book. When he took a short course at Harvard in 1999, the professor asked two questions through an anonymous survey: how much money will you have when you retire and how much money the average person here will have when you retire.

The results of on-the-spot statistics show that the answer to the first question is an average of $30 million and the answer to the second question is an average of $3 million. Most of the people here are American fund managers, and their actual level is not much different. Statistics show that everyone thinks they are at least 10 times better than the average.

It is overconfidence that gives people the illusion that they can overcome risk.

Secondly, put aside the Anchorage prejudice.

Anchoring prejudice itself is a means of luxury marketing.

The brand will first ask the model to shoot a poster with a package priced at 20, 000. When you see the 2, 000 bag at the counter of the brand, you will feel that you are taking advantage of it and pay for it. So you think the package of this brand is worth 20,000 yuan, which is the price anchor point.

When we move to the field of investment, we often hear such a voice: this stock has risen so much, why not sell it? Or, if it has already fallen by half, why not buy it? This is the performance of anchoring bias, the stock price bought as an anchor.

In fact, whether you should sell depends on many factors, such as valuation, quality and timing, but it has nothing to do with the buying cost, because your buying cost does not affect the future trend of the stock price at all.

Forgetting your costs is the first step to a successful investment.

Finally, never forget history.

Every few years, there is a time when the frenzy of the market makes people feel that "this time is different."

The author's former boss is an admirable investor. He often warned: "read more old books and newspapers, you will know that history is similar." "

Although the progress of science and technology is changing with each passing day, the constant greed and fear in human nature can always lead to the view that "this time is different", which has proved to be nothing more than a forgetfulness of history over time.

History is strikingly similar, and there has never been any "this time is different". The laws of history are always playing out.

Looking back at the whole book, it is not difficult to see that the ideas mentioned in the book are long-term proven and regular things that touch the nature of investment.

Although these regular things seem to be the simplest things in investment, they are also the most essential things in investment.

The nature of many things is not complex, or even simple, but simplicity does not mean that it is easy to do.To practice consistently and not to take a chance is the beginning of a successful investment.

Edit / emily