Winning Rules For Investors: Grasp The Long-Term Trend

In the long run,

Through the following simple data, we can see the impact of long-term, short-term and market noise on investment returns.

Examining the performance of Shanghai Composite Index in recent 15 years:

Noise trading - in 1 days as a unit, the profit probability is 0.28, and the average profit of each paction is -0.74%.

Short term pactions - 1 years' trading, the profit probability is 0.55, and the average profit of each paction is 19.93%.

Long term pactions - in 5 years as a unit, the profit probability is 0.78, and the average profit of each paction is 72.58%.

In a 10 year trading unit, the profit probability is 0.997, and the average profit of each paction is 134%.

This is only the average performance of the Shanghai Composite Index. If the blue chips with good investment performance will gain more long-term profits, short-term and noise trading, even blue chip performance, may also be affected by the short-term fluctuations of the economy.

To grasp the long-term trend of stock market and macro economy, we use HP filtering method to separate macroeconomic indicators and long-term trend of stock market. We can clearly see the relationship between macro economy and stock market performance.

According to our quantitative model, the growth of M2 and GDP is positively related to stock market returns, and long-term interest rates, CPI, PPIRM and deposit growth are negatively correlated with stock market returns.

In the long run, as long as the GDP does not fall sharply, and the growth rate is no less than 7.5%, the growth of M2 will not be less than 16%, prices will be controllable and scissors disappear, long-term interest rates will remain stable, domestic consumption will grow steadily and the growth rate of deposits will weaken. In the next 10 years, the stock market will grow at an annual average of no less than 20%.

China is currently undergoing economic pformation, and the government has repeatedly expressed its determination to quadruple the Chinese economy by 2020, that is, GDP will grow at an annual rate of 9%. To achieve this goal, we need to cooperate with a series of macroeconomic policies to make the macroeconomic indicators run smoothly, to promote the growth of corporate earnings and the growth of national disposable income, so as to promote the growth of wealth as a whole.

The stock market, as a barometer of macro-economy, will be affected by the market's own noise even though it will be affected by the short-term fluctuations of the macro-economy, but it will share the feast of economic growth in the long run.

Therefore, the key to investment is to grasp the long-term trend; the operation strategy is to take static braking and fully participate in the field.

Although the short-term market volatility will cause investors to shoulder some of the loss of books, the long-term trend will still be a guiding light for investors.