Learn to invest with Buffett

Chapter 89

Chapter 15 Rationality, the way to be a winner

Chapter 15 Section 1 Formulate a thorough investment plan
When to buy or sell is more important than what stock to buy or sell.

--Warren Buffett
As the saying goes, "It's hard for a smart woman to cook without rice", and the funds in stock trading are like the rice we rely on for our survival.Rice is limited and cannot be wasted and squandered arbitrarily, so how a clever woman can use the limited "rice" to "fry" a pot of good rice has become an extremely important issue.

Similarly, in the bloody stock market, how to make the most appropriate use of your funds, when various situations occur, there is plenty of space to adjust, so as not to be stretched, this is what the fund use plan can do for you you do.Warren Buffett always makes a careful plan before making any investment, so he can achieve success in investment.

Generally speaking, investors focus on the rise and fall of market prices, and are willing to spend a lot of time inquiring about various positive and negative news, studying the impact of basic factors on prices, and studying technical indicators for technical analysis. They make the most standard price predictions, but they often ignore their own capital scheduling and planning.

In fact, everything such as the allocation and planning of funds, and the use of strategies are based on the most basic concept - risk diversification.Whether the fund utilization plan is correct or not, and whether it is used properly can be measured by whether the risk is really spread as a standard.As long as it can diversify risks and allow investors to advance and retreat freely, that is a good practice.As for the specific approach to the plan, it is the benevolent see benevolence, and the wise see wisdom.Because there are 1000 people in the world, there will be 1000 combinations of dispositions, concepts, practices, and environments. No matter how superb and effective a plan is, it will have immediate results only after personal integration, and it cannot be copied mechanically. Investors should be careful about this remember.

There is a view in the market nowadays that diversification of investment risk is to invest all funds in different stocks.Therefore, someone really divided 100 million funds into several shares and invested them in different stock markets and different stocks: 20 to buy "Shenzhen Development", 20 to buy "Changhong", 30 to buy "Haier", 20 to buy "" Hualian", and buy some "Gold Cup" for the last 10.

Such an operation will not only fail to diversify risks, but it will be easier to mess things up.In case three of the five investments go against the market, he will be in a hurry and unable to cope with the ensuing changes.It is like dropping 5 watermelons from the sky at the same time, catch 3, but fail to catch the other 5, catch 1, fail to catch the other 4, or, most often, all 2 watermelons fall to pieces .Such an operation increases the risk.

The real solution to risk diversification, in a nutshell, is not to throw all investable funds into the market at once.

Investors, especially those who are new to the market, should try to keep the types of stocks in their hands as simple as possible, and must not choose stocks of different markets, different types, and different natures as mentioned in the above example.In this way, when analyzing and forecasting the market and dealing with unexpected market conditions that appear from time to time, you will not be overwhelmed and unable to cope.In terms of specific operations, the funds can be divided into three parts.The first part is used as the vanguard of the first investment, the second part is used as a bargaining chip, and the third part is used as a supplementary investment fund.For example, 100 million funds can be divided into 40 parts: 30, 30, and 40. After analyzing the price market, choose an appropriate product and invest the first 30 funds to open a position; Invest the second fund of 30 as a bargaining chip, gradually increase the size, and then select a profit point to take a profit and leave the market; when the market goes against the opposite direction and develops in an unfavorable direction, the second fund of [-] will be used to balance it out.And the last fund, [-] yuan, can be used flexibly, hunting down when the market is good, and serving as a counterattack force to make up for losses when the market is bad.

Investment motto:

It is worth noting that all these actions must be used in conjunction with more accurate market judgments and capital strategies, and keep a clear and restrained mind. When the market is going right, you must be ruthless and increase the price to chase after it. When the market is going wrong, you must calmly choose counterattack opportunities.

(End of this chapter)