A few days ago, I had a conversation with several old investors, and everyone had different opinions on the future of the stock market. Various macro and micro factors were mentioned, and the perception of being bullish or bearish was also different. However, one of the old investors had an interesting viewpoint, and his operational strategy is also worth learning from.
Regarding the outlook on the future, the investor stated that China's stock market must be tailored to its national conditions. The current bull market in the stock market is not caused by inflation or the appreciation of the renminbi, and the performance of listed companies has not increased by 400%. The real reason for the bull market is the institutional revolution in China's stock market - the reform of the shareholding structure.
If a stock does not have a market maker, the stock price will naturally fluctuate around its value, making it difficult for the stock price to reach an overvalued state. However, if there is a market maker, the stock price will naturally be higher than its value, and how much higher it can be depends entirely on the decision of the market maker.
Before the reform of the split share structure, the stock market experienced a long-term decline, and most stocks were dispersed into the hands of a large number of investors, at which point the stock price premium gradually decreased. However, the emergence of the split share structure reform suddenly led to the emergence of a super market maker in the entire stock market, who holds the vast majority of circulating stocks and promises not to sell the vast majority of their holdings within three years.
It is not surprising that stock prices have seen a significant increase from a stock market without a market maker to a stock market with a super market maker. This veteran investor emphasized that there is a certain risk in continuing to be bullish or bearish on the stock market, which has already risen above 4700 points. From the perspective of market makers, the vast majority of their stocks cannot be sold yet, and the foundation for the stock market to continue to rise is still there; But from a valuation perspective, the current stock premium has reached a dangerous level, and large-scale mid-term adjustments may occur at any time. However, even if there is a correction, it is still a correction in a bull market.
So, at the current position, it is not rigorous to say that the future will rise or fall. It is best to maintain a calm mindset and choose one's own operational strategy based on market changes, that is, to continue holding full positions and be prepared at all times.
How to always be prepared? When the stock index falls by more than 10%, or when one's own holdings fall by more than 10%, investors can clear their positions and exit the market, because a small pullback in a bull market will not reach the level of 10%. Once a 10% decline occurs, it can be judged as the arrival of a mid-term adjustment, and a stop loss level of 10% is more important.
This veteran investor also said that after implementing a 10% stop loss strategy, he has never been deeply trapped. Although there have been several instances of short selling, the overall effect has been very good.
