Why Warren Buffett always said, others greedy I fear, others fear I greedy. In fact, it is not really the god of the stock market is not afraid of the plunge, but because he will always let their hands, to keep a large number of safe assets, so that in this kind of mud, the market all over the cheap chips, he has enough ability to go to the bottom, that there is what can be afraid of? Really want not to be greedy are difficult. But usually this kind of time, we ordinary investors, then are full of sets of dead. For example, 18 years in the bear market, in the market price is extremely cheap, how many friends have played all their bullets, was set up, and even because of fear, the last cut meat cut on the floor.
All hold stocks, not only will you lose a lot of money in this plunge, and will definitely affect your confidence to buy low.
Because if you only hold stock assets, the stock market plunged 30%, you have to go up another 42% to get back to the capital, but at this time, if there is a bond replenishment, the same decline, may be up 20% to go back.
So keeping bond assets in your portfolio not only helps you stabilize, but also allows you to always have a backhand. Once the stock market fell too much, or the stock market crash occurred, gold everywhere, other investors are down when the confidence of all, we can come out to work, sell some of the bond assets, to plunge stock assets, this is the real low buy high sell, and so the return of the bull market is bound to thicken your earnings, so you quickly run out of advantage over the index.
Once you know the logic and principles of asset allocation to make money, there is absolutely no need to panic. Even if the market crash, the index will rise back for a while, but your stock and bond portfolios, due to a backhanded bottom, will all come back quickly. On the contrary, the market fell the more ruthless, stock and bond portfolio beyond the index of the more space, after a bloody storm, at any time to turn defense into offense.
Stocks are dependent on the sky, it is impossible to guarantee, every year will have a very good return. So for us, the best case scenario is to try to build a good position to complete the initial allocation in the market is cheap, especially in the big bear market. And when the market rises to a high level, try to reduce some percentage of stocks. The risks and opportunities of such extreme situations are sometimes discernible to us.
For example, when everyone is bearish on the market, where all cursing the evil stock market, out of the party mentioned stocks, all face like dust, in fact, the risk has been basically in this low price, as well as low mood digestion. At this time we can be less insurance, that is, less allocation of bonds, such as 3-4% enough to take a little more stock positions, waiting for the market to rebound.
On the contrary, when all investors are optimistic about the stock market, in the crazy chip grabbing, the people's daily newspaper are shouting 5000 points is the starting point of the bull market, and even the square dance aunts do not dance, all around the small garden to discuss their own stock returns, at this time we have to be more on the insurance, even if the configuration of the 80% bond position is not excessive. So we can completely by observing the market conditions, as well as the mood of investors around, to adjust their own defense ratio.