The market will change, the correct investment method will not change

Times have changed? This is a topic that investors often discuss.

In the past two years, the valuations of bright and bright leading companies have continued to increase, and it seems that prices are no longer important; many technology companies have multiplied their market value several times, making traditional companies that have worked hard for decades to shame; At the outlet, the stock price has been mediocre several times a year.

Kant, a famous German philosopher in the 18th century, once said that chemistry in his time "was a discipline, but not a real science" because "the standard of real science lies in its relationship with mathematics". Theories are qualitative and lack experimental data to verify.

With the advent of Newtons and Lavoisiers, disciplines such as physics and chemistry became predictable "true sciences" based on fundamental principles. Compared with people centuries ago, we know why apples always fall to the ground instead of the sky; the orbits of celestial bodies can be calculated through universal gravitation; given various conditions such as temperature and pressure, different substances can occur between different substances. Quantitatively predicted chemical reactions.

Although the stock market has been born for more than 400 years, investment is still not a "real science", and there is no universal formula.

Buffett's "good company, good price" is widely spread, but most people are either stuck in the first half of the sentence or make a mistake in the second half. What kind of company is a good company? What kind of price is considered a good price? The correct qualitative description makes it difficult for many investors to understand its essence and practice it correctly.

"Sisters of Wood" characterize investment as a "good track" with disruptive innovation, and have attracted a large number of followers while making great efforts in cutting-edge fields such as genetic technology and new energy vehicles. Valuations are no longer important compared to a star-sea-like outlook. Are these really good tracks for investors? How many companies will continue to be successful in the future? How much money can investors make?

Several Nobel laureates have invented a quantitative portfolio theory and put it into practice, almost to disaster. Through the formulas of these top economists, LTCM believes that the probability of risk in its investment strategy is extremely low, but the "small probability" event occurred 4 years after their establishment, causing it to go bankrupt and almost the entire US financial system. Drag into the water. Because these seemingly perfect formulas have false premises and false facts.

As a benchmark in the field of quantitative investment, Renaissance's internal product Medallion Fund has annualized about 40% in the past 32 years, and last year's return reached an exaggerated 76%. This internal fund uses tens of millions of lines of code to find opportunities for mispricing, and probably no one understands how it actually works. The three external products with average long-term performance lost 20%-30% in yield last year and are experiencing large-scale redemptions.

There is no fundamental theorem of gravity, and there is no fixed pattern for the stock market to rise and fall. Whenever the market moves towards another style, it always gives the impression that times have changed and this time is different.

But it is also the core and charm of investment. If all investors' expectations are consistent and correct, there is no excess return.

Times will always change, and the fundamental reason behind it is the changes in the industrial structure brought about by factors such as technological innovation. Many good industries and good companies that have created huge profits for shareholders have lost in the new environment, and there will be more Industries and companies with excellent business models and outstanding profitability continue to emerge, and there are different opportunities in different eras.

Market sentiment will also fluctuate, affecting the short-term rise and fall of stock prices, and even bring about overall or partial extreme performance. As Newton said: "I can calculate the trajectory of the celestial bodies, but it is difficult to predict the madness of people."

But no matter how the times change and market sentiment fluctuates, the cornerstones of long-term effective investment methods will remain the same: the right premises, the right facts, and the right logic.

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