Editorial: Why do diversify make money in the stock market? Lin Maochang, a financial book translator and president of the front-end futures company, originally like most investors, drew various reports, news and data all day long, but the investment return rate is not as good as expected. Later, he rethinked the blind spots of investment in the past and returned to the investment law of stock god Buffett - the key to achieving financial freedom is to be careful not to trade.
The highest level of financial management is to have stable income without having to worry about it. Save time worrying about money and life can be more affordable. This day when he visited Lin Maochang, a 60-year-old financial translator, he left half an hour early and took a walk to the place we agreed on. "I'm walking as much as possible now, and I can move and enjoy the scenery," he said. The unhurried and unhurried attitude is also incompatible with his investment concept.
In the past, Lin Maochang served as the general manager of Taiwan Futures Futures Company and was also in charge of the investment department for many years. In the early days, his methods of operating stocks were like most professional investors, who read the bill, report and financial reports every day, studied the profitability of 500 or 600 listed counter companies, and selected stocks that could make money for customers. After working hard for more than 20 years, he found that he was very tired from work and his body was very prone, and his efforts seemed to be inconsistent with his investment returns.
At the age of 45, he decided to work hard and invested on his own to earn income in the second half of his life. After several years of exploration and adjustment, he achieved the goal of financial freedom at the age of 52, with the annualized return on the stock being about 14%, which is far superior to most financial products on the market called stable interest allocation. The dividends received every year alone are enough to support the monthly living expenses, and there is still enough money to invest in accumulated assets in the stock market.
In the 15 years since his resignation, he had no grants or pensions, and his small amount of work income was the manuscript of occasionally translated financial books. Lin Maochang said that he spent much less time managing his finances than before, and his investment return and quality of life have become better. The key is to master the secrets of long-term investment - to leave and not act.
The old lady in the country actually beat professionals! The secret to making money is "not trading"He explained that "good money" refers to choosing a good investment tag. "Don't act" is important in strengthening long-term investment. As the stock god Buffett once said, "If you don't plan to hold a stock for more than 10 years, then you shouldn't have bought it at all." However, there are many people who know this sentence, but very few people who can do it.
Lin Maochang recalled that his actual encounter with Buffett's investment in Jinlu came from several short stories. In 2010, a man named Grace passed away in the United States, and he left behind a stock industry worth $7 million. It turned out that Gress was once the secret book of Yapei Pharmaceutical Factory. In 1935, she bought three Yapei stocks. After years of stock splitting and dividend reinvestment, it became more than 100,000 shares.
Similarly, in Taiwan, he also knew that there were several old ladies living in the country who bought stocks of Formosa Plastics, Nanya, Taiwan Mud and other companies in the early stage. They had not sold them for more than 20 years, and the dividends they received were repurchased into the stocks. Today, their annual dividends are higher than their children's annual salary. He also looked back at his holdings and found that the highest return on investment was the stocks that he had previously thought they were bad and sold so little stocks that he forgot to deal with.
"We professionals are like pianists who work hard and hard. The results of the competition are similar to those of amateurs who play 10 minutes in the morning and evening." Lin Maochang said with a smile. It is not difficult for a consumer to make money. Buying stocks in good companies and holding them for a long time will ultimately bring considerable rewards over the years.
But there are so many stocks in the listed counter, how can we choose the so-called good company? Lin Maochang suggested that first of all, you can refer to Buffett's principles and choose companies with poor advantages in various fields based on their life experience, such as holding patents, early brand investment, and great influence. For example, Xirui Pharmaceutical Factory is well-known for its production of Viagra and China Telecom has important telecommunications channels across Taiwan, etc., which are all "protective rivers" that rivals cannot reach.
In addition, there are several public indicators that can determine the quality of a company. For example, he is a habit of observing the long-term profit status of the company with EPS (EPS). If the company's EPS can maintain above 3 yuan within 5 to 10 years, it means that the profit is stable. Or you can also look at the Pure Value Return (ROE). Companies with ROE over a long period of 15% are usually suitable investment standards. Finally, you should pay attention to the company's long-term debt. Excessive company debt means poor long-term competitiveness, and even if the ROE is high, it is recommended to invest.
After finding a good company, the next step is to wait for reasonable prices to enter the market and not sell them easily. Lin Maochang pointed out that the market is rational most of the time, and overvalued stock prices will eventually be corrected to reflect the real value of the company. Generally speaking, a reasonable P/E ratio (PER, calculated by dividing the share price by earnings per share) is about 20. If the P/E ratio is too high, you should beware of the risk of stock price bubbles; if the P/E ratio is too low, it means that the stock price is undervalued and you can buy it at the opportunity.
Investment should be "Zhenghe Game" that only if you don't make short-term price difference can you make moneyLin Maochang observed that although there are many people who invest in stocks, there are not many investors who can actually make money in the end. The reason is that most people have the idea of buying low and selling high, and the profits mainly come from poor prices. Judging from economic perspectives, this kind of profit is a "zero-sum game" - some people sell stocks to make money, while others buy stocks to make money. Even if you make a small amount of money for a while, it may be given to the market later. Finally, only large capital and risk tolerance can make money. Those who win will win will win, and all the others will lose.
Furthermore, buying at the lowest point and selling at the highest point is far more difficult than people imagine. Lin Maochang took the Donghai Precision Machinery (2317) he held as an example. He once bought at 250 yuan per share, and his share price rose to more than 300 yuan, and then fell all the way to about 100 yuan. After another 3 or 5 years, it has grown to more than 300 blocks.
He recalled that when the stock price was low, the outside world said that the era of OEM profits from Donghai would end and was not optimistic about its future development. Although he did not sell it, he did not dare to buy it at a low price. When the price of Donghai's stock reached a high point again, he was reluctant to clear it, and then the stock price fell sharply to below 100 yuan. Although I have held this stock for more than 10 years and my investment rate is not bad, my mood is still difficult to avoid being affected.
"The stock market is up and down every day, and it is common for buying today and falling tomorrow. People who operate short-lines are easily blinded by information and cannot judge the bad development of a company's business." Lin Maochang said. He believes that the ability to invest and make profits forever should come from "Zhenghe Games": shareholders provide funds to allow professional managers to run the company. Only when the company develops well and makes stable profits will the shareholders make money. "In the long run, those who can make money in the stock market are not the price difference that makes the market speculation, but the company's profit," he pointed out.
Now, he has sold less shares in his hands. Taking his holdings for more than 10 years (6154), Juyang (1477), and Buffett's Poksha (BRK.A and BRK.B), whom he holds for more than 10 years, as examples, re-investment of interest every year will reduce the cost of long-term holding and the return on investment will naturally increase.
He also laughed and said that stocks often fall when they buy and rise when they sell. For example, he bought stocks of Huge Machinery (9921) for more than 10 years ago at a price of more than 40 yuan, and sold them at a price of 100 yuan. He was already satisfied. Unexpectedly, its stock price has now increased to more than 200 blocks. Putting unmoved stocks is often the most profitable!
When will the stock price stop falling? The reasons for judging the severity and diversifying the holdingsThe stock market has various positive and negative news every day. When should we adjust the holdings in our hands? Lin Maochang reminds that by returning to the long-term investment essence, you can calm down: "Market experts are like clouds, and the news is in the hands of the key people. Think about it, if there is really a lot of profit, why do others want to let you know?"
He quoted Buffett's analysis and pointed out that there are two possibilities for stock price declines: one is the fluctuation caused by unexpected events, and the other is the warning of long-term decline in competition. The most typical example of the former is the stock disaster caused by the global economic downturn. When encountering this incident, he will not only not sell his shares, but will deliberately "take up" and buy more while the stock price is low. "A good company has suffered an accident, but it is still a good company," he said.
For example, in early 2020, the COVID-19 epidemic once caused a plunge in global stock markets. Many people are not optimistic about the prospects of travel, but they have not sold the shares of a certain travel industry. The reason is that "this wave of stock price decline is not a problem with corporate governance, but a problem with the big environment. As long as it has been more prosperous than its peers, it will be another world after the epidemic."
However, Lin Maochang also pointed out that if he encounters situations such as changing companies and long-term businessmen, he will seriously consider his appearance. If the impact of the incident cannot be judged as long-term or short-term, don't take risks, so as not to lose money.
In addition, considering the need to diversify risks, he also suggested that the holdings should have 5 to 10 files and be purchased in batches. He admitted that he had made wrong judgments. In the early days, he held shares of the Tourism Tourism Industry Co-development (5702), and was optimistic about the vision of his parent company's unity. EPS was also quite good in the past few years. Unexpectedly, the company's resort link was re-created by disasters and finally got off the cabinet during the SARS period in 2003. Fortunately, the unified development accounted for only about 10% of his shares at that time, and even if there was occasional "mistakes", the entire market would not be lost.
Since I published two stock market investment books, people often asked Lin Maochang: "Which stock should I buy? When can I buy it?" But he said bluntly that if I cannot overcome my inner demons and always want to see results in the short term, it will be useless even if I really get the "bright card".
He exemplified that Pokshay, a holding company held by Buffett, opens its shares every quarter. In theory, you can see results by buying stocks in a long period of time. But people always have various concerns: For example, technology stocks are rising sharply and Buffett hasn't bought them. Isn't it wrong? Is there really no problem with Buffett buying it the next day? "That's why we won't see the second Buffett," said Lin Maochang.
He emphasized that investing does not require excessive pressure on yourself. If you pick a good company, basically, you only need to "stand still without moving" in the future and you don't need to enter and exit the market in a lot of time. Even if you only start investing in the age of 50, according to the average life of modern people, you can accumulate wealth for half a lifetime, and the accumulated profits over the years will be quite impressive.
"This investment method will not make you rich and expensive, but life is free of trouble," said Lin Maochang. Now, although he still watches the bill every day, he no longer has to look at the stock price as he used to. After reaching financial freedom, you have more time to explore the joys of life, such as running, craft painting, ink creation and plant organization cultivation. A life that doesn’t have to suffer for money will become wider and wider the more you live!
Original text: 45-year-old zero pension and leave, with an annual income of 14%! Lin Maochang, a former senior financial industry: If you want to make money by investing in stocks, the key is "not trading"