Author: Dongdong has fishSource: Baidu Release time: July 13, 2021
For investors, the past decade has been a 'great' decade.
Between 2010 and 2020, the Morgan Stanley Capital International Global Index rose nearly 146%, while the Bloomberg Barclays Global Composite Bond Index climbed over 49%.
In the Chinese market, real estate and non-standard assets have sparked a frenzy of returns, and rigid redemption allows investors to operate with their eyes closed.
Compared to the past 10 years, the characteristics of the next 10 years may be lower returns and greater volatility.
Recently, renowned American investment guru and founder of Oaktree Capital, Howard Marks, shared his views on global investment in the second half of the year.
Howard pointed out that we are currently in an investment environment with high asset prices and low expected returns, and the bottom line of investment is to recognize the reality of being in a low return, high-risk market.
He proposed five investment strategies to choose from, and also believed that in the current market environment, investors only have these options to choose from.
We believe that these five investment strategies are equally applicable in the Chinese market, so today we will share them with you.
Why is the expected rate of return decreasing now?
According to the theoretical explanation of CAPM (Capital Asset Pricing Model), the expected return on assets in the capital market is the market risk-free rate plus the risk premium adjusted by the risk coefficient.
Simply put, the greater the risk of an investment, the higher its expected rate of return compared to the market's risk-free rate of return. Therefore, when the risk of an investment remains constant, the higher the risk-free return in the market, the higher the expected return on the investment, and vice versa.
Before the introduction of the new asset management regulations, rigid redemption made the yield of 4.5% -5.0% for bank wealth management almost a potential risk-free yield.
However, after the introduction of new regulations on asset management, rigid redemption will no longer exist, and bank wealth management will shift towards net asset value management, resulting in a decrease in potential risk-free returns in the market.
The downward trend of the interest rate center remains unchanged, and if investors maintain their risk appetite, expected returns will be lowered.
If investors reduce their risk appetite and choose a prudent and conservative allocation, they will need to accept lower investment returns.
Most investors hope to pursue low risk and high return, so is there any possibility of low risk and high return in the world? There must be some.
Firstly, it is impossible for many people to recognize and discover it. If everyone discovers and believes in it, then such an opportunity will be instantly overwhelmed by everyone's buying interest.
Secondly, it is definitely not a long-term opportunity. If this opportunity exists for a long time, people can continue to use it to earn low-risk and high-yield money, which is not in line with reality, and reality is mean regression.
If you have a low tolerance for risk and cannot reconcile with high volatility, it is better to choose a prudent investment strategy, but the premise is to lower your investment expectations and allocate fixed income assets without expecting returns from equity assets.
Of course, safety first does not mean rejecting all possible investment risks, but rather examining investments with greater caution and rigor.
I don't quite agree with 'holding cash' as an investment strategy. Perhaps in the short term, it could be waiting for a better opportunity, but in the long run, keeping six months of living expenses in hand and reserving some emergency money market funds is enough.
We all agree that the money in our hands is becoming increasingly worthless. The purchasing power of 100000 yuan now is equivalent to around 20000 to 30000 yuan in 2000, and the difference between 70000 to 80000 yuan has evaporated.
Despite the increasing economic uncertainty, 'cash is king' may still not be a good strategy. Due to the existence of inflation rate, the statement 'no investment, no loss' is a false proposition. In the long run, people should hold assets and high-quality assets.
But since it has been included as one of the available strategies for all investors by Master Howard, it at least indicates that the master believes that the global liquidity feast has entered the second half. Although key evidence of further support for economic recession has not yet emerged and the future prospects are still unclear, extremely conservative investors can also consider this resilient strategy as one of the alternative options.
Taking on huge risks without receiving corresponding compensation is something that most investors often do.
If we bear 1 unit of risk in the past, we can receive 1 unit or even more reward; But now we can only get a reward of 0.5 units, which means that the marginal reward for increasing risk is decreasing at this stage, so increasing risk becomes less cost-effective.
Investors must realize that high risk does not necessarily lead to high returns.
For the second half of the year, the pressure of slowing down China's economic growth will increase, and major developed countries will gradually begin to discuss "policy exits".
The epidemic is still the mother of many fluctuations in the global economy and market in the second half of the year. Whether China and the United States can achieve universal immunity through vaccines, discussions on the withdrawal of QE, and frictions between China and the United States are all potential risk factors in the second half of the year.
Therefore, now may not be the time to pursue positive returns, but if we stand within a 3-5 year timeframe, we are still optimistic about equity assets.
If you follow the content of Howard's memo for a long time, you can also know that as he said, it is indeed difficult to find cheap opportunities in the popular sectors of the current public market.
To achieve absolute returns or higher risk adjusted returns within an acceptable range, it is highly dependent on the professional ability of investment managers to actively manage and find undervalued stocks or appreciation opportunities.
Choosing timing is better than choosing people, excellent fund managers are the best assets of this era.
For Master Howard, in the current low return investment environment, his choice is a combination of Strategy 1, Strategy 2, and Strategy 5.
That is to say, try to maintain stability, slightly inclined to reduce some risks while seeking better market opportunities, because some assets are relatively cheap in price, have market niches, and have the help of professional investment managers.
What else can we do in a low return world? The answer is that we don't have many choices, what's important is that the choice is suitable for ourselves.
Excellent investors are not those who have achieved the highest past returns, but rather those who have obtained excess returns relative to the risks they have taken on.
Undertook very low risks and achieved decent returns. Or they may have taken on appropriate risks and achieved good returns. All that can be achieved are excellent investors.
The more failed investments are those that take on significant risks but do not have corresponding expected returns. In the short term, an investor who consistently earns a 10% return may not necessarily be worse off than someone who earns an annual return of 25%. What is more important is the risk behind the return.
Risk and return are always intertwined, but if we add the factor of "time" and use it to reconcile fluctuations, we will unleash the power of compound interest. In terms of investment, time is Archimedes' lever, and the fulcrum is a firm and practical investment strategy.
