How to overcome investment drawdown anxiety? Buffett has also been net worth, and no one can make money all the time! "Being able to survive" is an essential quality for investors

The above audio technology comes from: iFLYTEK dubbing

Little Red Book of Investments – Issue 62

Bill Gates snapped.

Since the beginning of this year, the performance of consumer, pharmaceutical and other sectors has been bleak, and the anxiety of net worth retracement has spread among investors.

But in investing, no one can guarantee that you will make money every month every year, and the results of short-term evaluations do not make much sense. Even if Buffett, the stock god, has earned up to 30,000 times in the past 50 years, he cannot achieve positive returns every year, and between 1973 and 1974, Buffett has had a tragic experience of net worth.

People can only earn money in their own circle of ability, the market always has a time not to side with themselves, and they can bear the loneliness to gain. It is unrealistic to hope that your stock is rising year after year, and it is unrealistic to surpass all other industries and hot spots at all times.

There was once a video circulating about a game in which a participant was about to catch a random gift that fell from above, a big aunt stood quietly waiting in place, and twice easily received a gift that fell from above, while a doctor was busy trying to grab all the gifts, so he kept running to the place where the gifts were falling, ironically, the doctor found nothing at the end of the game.

The reason is very simple, this game is like a great investment. The pursuit of short-term results inevitably leads to investors constantly looking at the eyes of the market to act, and may end up with little gain. As Jesse Livermore has a maxim in His Memoirs of a Stock Maker: "You have to make a lot of money by concentration, not your brain." Very few people can sit upright and make the right judgment. ”

Buffett's net worth slash moment

Even the best investors will inevitably encounter huge net worth drawdowns, and the market trend is a collection of emotions of group participants, which will occasionally wander between panic and greed.

In the 1970s, the US fiscal deficit soared, inflation was high, the economy entered a downward channel, and the oil crisis brought about by the war exacerbated the market panic. The S&P 500 retraced from a high of 120.24 points in January 1973 to a low of 62.28 points in October 1974, a decline of 48.2%. Based on the 1973 net drawdown of 2.5%, Buffett's net worth drawdown in 1974 was 48.7%. This means that Buffett's net worth was cut between 1973 and 1974.

But Buffett does not question the failure of the value investing method because of the huge drawdown in net worth. Instead, in an interview with Forbes in November 1974, he said: I feel like a very young man who came to my daughter's country and the time came to invest. ”

Buffett also said at the time: "You're dealing with a lot of idiots in the market. It's like being in a big casino where everyone else is binge drinking. If you can still stick to your own Coke, you'll be fine. ”

Buffett's famous phrase "The market is a voting machine in the short term, and a weighing machine in the long run" is precisely from this pessimistic moment in 1974.

When Forbes magazine asked: What if the market never realizes it's a cheap stock? What if the stock market never returns to normal value?

Buffett replied, "When I worked at Graham Newman, I asked my boss, Graham, the same question. Graham shrugged and then replied that the market would always realize value in the end. He was right – in the short term the market is a voting machine, in the long term it is a weighing machine. ”

Buffett also said that the reason why people can become successful investors is because they firmly grasp the successful enterprises, and sooner or later the market will reflect the value of the enterprise.

Short-term performance evaluations are meaningless

If you count from 1965, of the 56 years that Buffett invested, the year of the net value drawdown was 8 years. In addition to the 50% retracement of net worth from 1973 to 1974, Buffett's net retracement was as high as 31.8% during the subprime mortgage crisis in 2008, and Buffett's net retracement was 19.9% before the dot-com bubble burst in 1999.

Short-term performance evaluation does not make much sense, and investment is a game of looking at the overall situation. Duan Yongping also said that investment is a bit like playing golf, 18 holes, a certain hole is not important to play well, because golf ultimately depends on the whole result, not the result of a certain hole.

If you look at the overall situation, Buffett has achieved 30,000 times the return in the past 50 years of investment, worthy of the title of stock god. But if Buffett's portfolio retraced nearly 20 percent, and the NASDAQ rose 86 percent that year, it's no wonder Barron's famous article "Warren, What's Wrong With You?" 》

When the market is in full swing, value investors will basically outperform the market. Therefore, Buffett also said in a letter to shareholders as early as 1965, "We are doing well or badly, and we cannot measure it by the profit and loss of our year." Evaluation should look at five years, at least three years, and it doesn't make sense to be lower than three years of performance. Our partnership fund has definitely been behind the Dow for years, or even far behind. The long-term rate of return on investment would be greater than 10 percentage points above the Dow, so please adjust some of the above figures in your own minds. ”

Many well-known investors in A-shares have long-term excellent performance for 10 or even 20 years. Since the beginning of this year, the pharmaceutical, food and beverage sectors have retreated sharply, and core assets, value investments and these investors have been ridiculed in various ways. In fact, if our investors only take a few quarters of performance to evaluate their performance, it is our understanding of investment that has not yet entered the room. If we can understand that the market often deviates from the simple truth of the fundamentals of listed companies, and uses long-term money to make investments in the circle of ability, there will naturally be no anxiety in the face of market downturn.

In the short term, the value of stocks will be drowned out by market noise. The century-old asset manager believes that in the short term, a company's stock price is not closely linked to its fundamentals, and signals reflecting the company's progress or problems are drowned out in the noise.

Because of this, Burke Further argues that real investors consider investing on a ten-year basis, because only over a long period of time will the signal be transformed into a clear picture. The huge opportunities that the most successful companies seize will eventually manifest themselves as the strongest share price increases.

As Hu Weitao, chairman of Wanli Fuda, said, "Everyone should earn money in the circle of ability, and if you want to make money every moment, you really think you are a god." The pursuit of good years and months, good every day, with short-term success or failure of the hero, may eventually become a bear. ”

Great investors are surviving, although this year has borne the pressure of the market, but many investors who have passed the test of time have shown the ability to resist the pressure of value investment, and it is an essential quality for excellent investors.

After surviving the net worth of 1973-1974, Buffett achieved an investment return of 129.3% in 1976 and a 102.5% investment return in 1979. By 1980, Buffett had not only come out of the shadow of his net worth, but his net worth had increased fourfold compared to 1972.

Munger said that my generation, our group of people who make value investments, which one is not boiled out, persevere, and even do not need to be smart.

Editor-in-charge: Tactical Constant