How to select a successful fund with a high winning rate?

The teacher asked Billy Bob, "If you have 12 sheep and one of them jumps over the fence, how many sheep do you have?"

Billy Bob replied, "No."

"Well," said the teacher, "you obviously can't subtract."

"Maybe so," Bob replied, "but I do know my sheep."

For every investor who wants to invest in funds, it is very important to know about funds! There is a popular saying that "it is better to buy stocks than to buy funds". In this issue, we will talk about funds in detail and see how Buffett and his teacher Graham tell you how to choose funds.

Speaking of funds, it is purely an American invention. 1924, a salesman named Edward Leffler from aluminum pot introduced the fund to the American market. The fund is very cheap, convenient and diverse, managed by professionals, bringing about 54 million American families and even more families around the world into the investment tide.

At the same time, the fund also has many problems, such as: the performance is lower than the market average, and the random fluctuation is too large. Therefore, smart investors must choose funds carefully. Next, we will learn about the fund through some common questions.

(a) the pursuit of "performance" of the fund, is it a good fund?

When choosing a fund, investors can appropriately compare the performance of the fund in the past period (at least five years), as long as these data do not mean that the whole market itself is a sharp upward trend. Because of the skyrocketing trend, it can only show that fund managers are speculating excessively and have temporarily gained excess returns.

If they blindly pursue the "performance" of the fund and think that their income is higher than the market average (or index), they may succeed temporarily, gain popularity and expand the fund scale. But at the same time, the achievement of the goal is bound to be accompanied by a large-scale rise in risks.

Especially for some new fund managers, they even lack a complete experience of bulls and bears. They define "good investment" as buying the following stocks: in the next few months, the market price of the stock will rise sharply, and then a large amount of funds will flow in, resulting in the company's stock price completely divorced from its assets and profits. In fact, these fund managers just naively hope that these enterprises will succeed in the future, and they want to skillfully take advantage of the speculative enthusiasm generated by poor public information and greed.

Managers of investment funds will inevitably involve some special risks when seeking better performance. The experience of Wall Street shows that well-managed large funds can achieve slightly higher than the market average in a few years at most, but if they are not properly managed, such a situation will occur: they will temporarily gain amazing illusory profits, and then they will inevitably encounter disastrous losses. Some funds continue to exceed the market average for 10 years or even longer, but these are mostly special cases, such as stopping accepting new investors, which will maximize the return of fund holders, although it will reduce the management fees earned.

In this regard, many China citizens are familiar with the case of the fund betting on sub-new shares. In 20 16 years, the fund share increased from 92 million to16.84 million in one year, an increase of 17 times, of which 98% were retail investors. In that year and the following year, the fund fell by more than 20%.

(2) Is the "best-selling fund" worth buying?

Most investors will directly buy the fastest-growing fund (best-selling fund) under the assumption of "continuing to rise". Because psychologists have proved that human beings are born with a tendency to predict long-term trends based on a series of short-term results. Just as our favorite restaurants always provide quality meals, smart children can always get good grades. If a fund outperforms the market, intuition will tell us that it will continue to perform well.

But in fact, luck is sometimes more important. Catch up with the market, the fund manager may look great, but hot things will soon be left out in the cold, and the "IQ" of the fund manager will easily shrink by half. For example, let's look at what happened in history:

This is the hottest 10 fund in the United States in 1999 and the highest rate of return in history. However, the sharp decline in the following three years not only erased the huge appreciation before, but even the principal was only 30-70%, and the worst thing was that only 8% of the principal was left.

Therefore, it is the stupidest thing for investors to buy funds based entirely on past performance. We must understand the following points:

1, it is impossible for a general fund to choose a good stock by bearing the research and transaction costs;

2. The higher the fund cost, the lower the income;

3. The more frequent the fund purchase and redemption, the less opportunities to make money;

4. Highly unstable funds (the fluctuation range exceeds the average) may be in an unstable state for a long time;

5. Funds with high returns in the past will not be winners for a long time to come.

What needs to be added is that although the past performance of the fund can't reflect the future return well, you can use some of its factors to increase your chances of selecting excellent funds; Also, even if the fund can't win from the market, it is still very valuable, that is, at least it can provide a cheap way to diversify the portfolio, so that you don't have to spend time picking stocks yourself.

In China's fund market, there is also a so-called "champion curse". Usually, people who won the championship in the past will not do well next year. For example, in 20 15, the E Fund's emerging growth fund, which ranked first in mixed-base performance, stood out with an ultra-high return of 17 1.78%, but in 20 16, it ranked fourth from the bottom with a loss of -39.86%, because the investment direction was concentrated on Due to the change of market style, those leading funds were heavily invested in the bull stocks of that year. When the market style changes in the next year, they are also inactive and can only watch the funds fall with the stocks. Even like stepping on letv, no one answered.

(3) Why can't many outstanding funds be maintained?

1) The fund manager jumped ship. When a stock picker seems to have some ability to turn the stone into gold, everyone wants him, including competitors; Maybe he will start a business alone and set up his own fund company. If you only see the historical good performance of this fund, but the fund manager has changed, then be careful.

2) Overexpansion of assets. If the performance is good, the scale will inevitably increase greatly. At this time, the fund manager is faced with several choices: first, keep cash for a rainy day, but if the stock market rises, it will damage the performance of the fund; The second is to increase the existing stocks by adding new funds, but now these stocks are actually seriously overvalued; The third is to buy more new shares, but spend more time studying and staring at these new companies. Fourth, if the scale is too large, the fund can only be forced to hold companies with large market value or spread to better small companies, otherwise it will exceed the regulatory limit.

3) superb skills no longer exist. Some fund companies will first "incubate" some funds with their own strength, such as buying some small-cap stocks and new shares, and then attract a large number of public investors by announcing their earnings. Once thousands of funds are added, the return of these free incubation funds is almost negligible.

4) The cost rises. Excessive scale may also lead to an increase in transaction costs and management costs.

5) herd behavior. Once the fund is successful, the scale of the fund is expanded and the management fee income is considerable, then the fund manager will get used to the status quo and become timid and imitate others. Some large-scale funds, like a flock of sheep with full meals, walk lazily with staid steps and bleat. Almost every fund also holds consumer stocks among online celebrities, such as Kweichow Moutai, Midea Group and Gree Electric, and the proportion of holding these stocks is almost the same. But history will prove that this is unsustainable.

(4) Then, what is the potential of the fund to maintain success and high winning rate?

1) Their fund managers themselves are some major shareholders, which is actually equivalent to what we now call "internal purchase". If the fund manager holds his own fund in substance, the conflict between the fund manager and the fund investor can be solved, so that the fund manager will manage the fund just like his own fund.

2) They are very cheap. A high cost does not necessarily mean a high income, and a decrease in income will not bring about a decrease in cost. So Graham has always recommended index funds.

3) They dare to be different. When Peter Lynch managed Fidelity Magellan Fund, he bought cheap assets, no matter what other fund managers held. For example, 1982, he first holds a large number of long-term treasury bonds, and then he holds the most assets of Chrysler. At that time, many people expected that the car manufacturer would go bankrupt. 1986, Lynch bought many foreign companies, such as Honda, Volvo, Norwegian Aluminum and so on.

4) They don't accept new investors. They refused to accept new investors and only allowed existing investors to increase their positions. This does not put the personal interests of the fund company above the interests of customers. (It will not blindly expand the scale and harm the interests of existing investors)

5) They don't advertise. The best fund managers are usually those who don't seem to want to make your money.

As for how to choose a fund? What is the right time to sell the fund? What funds did Buffett and his teachers "recommend"? We will share it further in the next issue. You can also pay attention to the micro-signal of "Good Buy Business School" and pay attention to more classic books and reading notes.

In the new year, our columns will be expanded from 9 to 30, and the total number of audio episodes will reach 500. In particular, it will bring a wave of reading notes of classic financial classics, such as Peter Lynch's Successful Investment, Walking on Wall Street, How to Choose Growth Stocks, Irrational Prosperity, Millionaire Next Door, etc., into our analysis. Hurry and join our book club ~

If you want to know more financial hotspots, learn more grounded investment and financial management courses, participate in our live broadcast and interact with our lecturers, you must pay attention to the official account of WeChat, so that you can buy WeChat from business schools and leave a message to communicate with our lecturers ~ ~