How to understand risk control? How to implement risk control?

Many people are talking about the importance of risk control, but few people really want to know about it. Everyone has a different definition of risk control. Some people say that diversification is risk control, some people say that controlling positions is risk control, some people say that holding bought stocks for a long time is also risk control, and some people say that fast-forward and fast-out, and resolutely stop loss and take profit are also risk control.

Let me talk about my understanding of risk control. Of course, this is our view on Xinghan Investment:

1. First of all, I think risk control is a systematic behavior, not a single logic. This system is top-down and very huge.

2. Secondly, we should know the source of risk. What are the sources of risk? I simply classify it as: 1) macroeconomic risks; 2) Risk of market fluctuation; 4) Risks of changes in industries and enterprises; 5) Position &; Configuration risk; 6) Trading strategy &; System risk; 7) Asset allocation risk.

Third, think about how to run risk control. I think it is necessary to give each risk indicator a threshold to control. Suppose we give equal weight to each risk source, score according to 1- 10, and define the comprehensive risk value of 0-3 as low risk, 4-6 as medium risk, and above 6 as high risk. Here is an example:

① Macroeconomic risk: The global economy is depressed, but China's GDP is accelerating, inflation is moderate, interest rates are stable, and the macroeconomic risk value is very low (risk value =2). Theoretically, we should increase our positions and invest heavily in China.

② Market fluctuation risk: At this moment, the overall valuation of A shares is very high (for example, 100 times PE), and the corresponding risk value is 10. If you invest in index ETF at this moment, you will take a great risk (10+2)/2=6.

③ Risk of industry and enterprise changes: But if you invest in an industry with very low valuation and stable prospects (such as financial stocks, white horse stocks and high-quality Hong Kong stocks), assuming the risk value = 1, your comprehensive risk value will be relatively low, which is 4.3 = (2+/kloc-0+1)/ If you diversify your investments and choose certain stocks, your risk level may be lower. The specific risk value depends on the fundamentals and valuation of individual stocks. There is a huge difference in the risk level between buying a 5PB brokerage stock and buying a 1PB brokerage stock and buying Yili and Huishan. This is difficult to quantify, and can only be comprehensively measured by the prospect of the industry in which the enterprise is located, the future performance growth rate of the company, the current asset quality, the strengths and weaknesses of the management, and the valuation, thus giving a rough risk value.

4 positions &; Allocation risk: According to the above situation, if you hold an ETF or a stock in 80% positions (with a risk value of 8), then your comprehensive risk value is greater than 6, that is, (2+10+4.3+8)/4 = 6.1,which is a high-risk investment according to our hypothetical definition. But at this time, if you diversify into several industries with low valuation or stocks with low correlation coefficient, your risk value will be reduced (I personally think it is more reasonable to divide the warehouse into 10- 15 varieties).

⑤ Asset allocation risk: refers to macro asset allocation (micro asset allocation refers to position level and position quantity). For example, if the global economy is depressed, the risk assets of various countries are expensive and the overall risk level is high, but you allocate the assets of safe-haven countries (economically independent), then your risk level may be relatively low. And for the same country, if you allocate different types of assets, the risk level is different. You buy government bonds with similar interest rates and corporate bonds with different risk levels. The risks of buying a house and buying government bonds are completely different.

⑥ Trading strategy &; System risk: Different trading strategies and trading systems have different risk levels. Trading strategy: the risk value of holding white horse blue chips for a long time can be 2, and the risk value of speculating junk stocks for a short time can be10; In terms of trading system, the trading risk value based on subjective judgment is relatively high, while the trading risk value based on quantification is relatively low.

3. Finally, the key issue is how to define the risk value of each risk. You can use quantitative methods:

As for the index, we all know that the PE of US stocks hovers between 15-25 times, which is greater than the risk value of 25 corresponding to 10, and less than the risk value of 15 corresponding to 0 (our weekly market valuation interval table is based on this logic);

Trading strategies can also be calculated quantitatively, such as the well-known returnee trading method. You can backtest the history, calculate your maximum loss volatility rate of return, and finally give a risk value;

For large asset allocation, position level, position variety, etc. Value at risk can be defined artificially.

For macroeconomic and industrial stocks, various data indicators can be substituted into quantitative models to analyze the current risk value. For example, various macroeconomic data can be substituted into the macro analysis model to judge the current macro situation. For example, indicators such as income growth rate, profit rate, debt ratio, asset turnover rate, cash flow, ROEROIC, PE/PS/PB/PEG can be substituted into the analysis model. Of course, there is subjective judgment here.

Finally, that is how to determine the weight of each risk, which is left for everyone to explore. After all, everyone's investment style is different: speculative people may give higher weight to trading strategic risks, while investment people may give higher weight to fundamental risks. People with fixed income may give higher weight to macroeconomic risks and market fluctuation risks. ...

5. To sum up: if the economy is good, but you buy at a high level, you will take great risks-but if you buy low-risk assets (such as stocks with good industry prospects and low valuation), do a good job in reasonable position management and decentralized asset allocation, then the risks you take are not so great-but if you adopt very aggressive trading strategies, such as short-term rise of underlying stocks with good fundamentals and low valuation,

Let's give another example: suppose the economy is very bad, you buy high-valued assets, have no global asset allocation, don't look at the fundamentals of industries and individual stocks, and hold short-term game theme varieties in heavy positions (typical retail operation methods), but if you use relatively bullish trading strategies and trading systems, such as implementing strict stop-loss strategies (such as the 20-day moving average rule that A shares are particularly effective), or if ROC momentum strategy is adopted (refer to the 28-round fund of snowball omelet, Historical backtesting shows that the net withdrawal is very small, the biggest loss is very small, the bull market keeps up with most indexes, and the bear market leaves early), then your risk level can still be said to be acceptable (scattered cattle among retail investors). Many people failed because they didn't have good risk control at the peak of the bull market, continued to take risks at a high level, and finally ended up on an asset roller coaster, while some people quit in the middle of the bull market because they thought the risk was too great and didn't eat the bubble in the second half. Faced with these two problems, the best situation is to formulate a set of high-level chasing trading strategy, that is, in the case of high risk level, follow the market strategy and stop immediately once the position is broken (such as ROC momentum strategy, 20-day moving average trading rule, turtle trading, etc.). ).

In short, everyone should learn to calculate the risk level of your current assets. Many retail investors fail because they don't understand the source of risk and the risk of their own assets, so they die in a seemingly low-risk situation, because you are likely to make high-risk investments (such as buying 100 times of small and medium-sized enterprises and five-board theme stocks). On the contrary, many experts still invest heavily in seemingly high-risk situations, but the risks they may take are very low.