What does stock allocation mean? Are there any benefits to doing stock allocation?

What does stock allocation mean? To put it simply, it means lending you money to speculate in the stock market. For example, if your capital is only 100,000 yuan, through allocation, your capital will reach 1 million yuan. As long as the principal you invest in the stock market will increase, if the stock price rises, 100,000 yuan will be added. If the yuan rises by 10%, the profit will be 10,000 yuan. If the price of 1 million yuan rises by 10%, the profit will be 100,000 yuan. In this way, you can achieve your goal of small cost and big profit.

What are the benefits of allocating capital? If the stock market is always on an upward trend, the stock price is always on the rise, and there is no risk of any correction, any of us can allocate funds, and even I will encourage you to allocate funds, because there is no risk in the market, and you can trade and buy whatever you want. Every stock has its daily limit, so of course the more principal, the better. But this situation is impossible. What often happens is that the market falls most of the time, and stock prices also fluctuate greatly. The market often undergoes large corrections, and many risks are uncontrollable. So when faced with this situation, stock allocation should be absolutely prohibited.

Therefore, I personally have always emphasized that we must stay away from capital allocation, stay away from capital allocation, and stay away from capital allocation.

Once you use stock allocation, the initiative in trading is not in your hands at all, but in the ups and downs of the market. Once the market fluctuates significantly, such as the jump a few days ago, If the stock price opens downward and the stock index adjusts sharply, you may lose all your money in an instant and touch your closing line.

If you have your own funds, you can choose to wait patiently and wait for the market to stabilize and rebound before leaving the market. You can even cover your position and make a profit by lowering the cost, but if you use Stock allocation, these operations have nothing to do with you. You must pray that the market will always rise. This is an unachievable goal. Therefore, I still want to warn you here: the stock market is risky, absolutely do not allocate funds, and you need to be cautious in transactions.

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Some time ago, the stock market was booming, and new investors were rushing to join the market. There were many text messages on everyone’s mobile phones asking you to allocate stock funds. As a new financing method, stock allocation also shows its unique appeal. So some new investors asked, what does stock allocation mean? Can we try stock allocation?

Stock capital allocation mainly allows you to borrow money to speculate in stocks. For example, if your capital is only 100,000, through a leverage of 1:10, your capital can reach 1 million. During the rising stage of the stock market, as long as The more principal you invest, the more money you make. If you only use 100,000 principal to trade stocks, the stock market will rise by 20% and you will only make a profit of 20,000. If you invest 1 million in stocks and the stock market rises by 20%, you will make a profit of 200,000. And your principal is only 100,000, which is the charm of leveraged stock trading.

The biggest advantage of allocating funds for stock trading is that if you are in a bull market and the stock index basically rises every day, there is no particularly big risk. Even if you are trapped, it is short-term and will rise again soon. Then Anyone can allocate funds. But the problem is that even in a bull market, the stock market will fluctuate greatly. If you suddenly fall for several days in a row, you will run the risk of being forcibly liquidated if you trade stocks with funds. Moreover, once you use stock allocation, the initiative in trading is not in your hands at all, but in the rise and fall of the stock market.

There are three major risks in stock trading with capital, so we recommend that you do not borrow money to trade stocks: First of all, if the stock market rises with capital, everyone will be happy, but if the stock market falls, you will lose your principal first. . If your principal is 100,000 yuan and the capital allocation is 1:10, you will still make more money even if it rises much. But once the stock market plummets, your 100,000 yuan principal will be wiped out first. Before you almost lose all your capital, if there is no margin call, the institution will most likely force you to liquidate your position, because the institution lends you money, and their Lending funds cannot be risky.

Furthermore, 15% of A-shares are bull markets and 85% of the time are bear markets, which is too risky for investors with capital allocation.

And even in this 15% bull market, when bulls and bulls alternate, or even in the early stages of a bull market, the stock market fluctuates greatly. Therefore, if investors speculate in stocks with leverage, they will lose their capital even if they encounter a sharp decline in the stock market in a bull market. Guang was eventually forced to close his position. If you have your own funds, you can ignore the fluctuations in the stock market and just wait for the stock market to launch a new round of upward attacks.

Finally, there is a cost to allocating funds for stock trading. Usually, the interest rate for allocating funds to institutions for stock trading is between 7-10%. In other words, if investors make money, the financing institutions will take away part of your profits, but if you lose money by trading in the stock market, the institutions will not be willing to pay for your losses. If you want to lose, you will still lose your principal. . Obviously, part of the winning money will be divided, and any losing money will be attributed to the investors themselves. In this way, investors' investment risks are very high, and the probability of making money is very small.

The advantage of allocating funds for stock trading is that if you encounter a bull market and use the principle of leveraged funds, you have the opportunity to obtain more wealth. However, this must be done when the stock market is rising every day. You must know that even in a bull market, there will be short-term declines, and there are times when they are uncontrollable. Therefore, for investors, stock allocation is asymmetrical, which means that the profits are shared with institutions. But if the stock market drops, it will only cause you to lose all your principal. Therefore, for institutions, stock allocation means lending money to you to trade in stocks and making a huge profit, but for investors, it means losing everything in just an instant. Therefore, it is best to use your own funds for stock trading. Allocating funds to stock trading is very harmful, so don’t try it.

Stock allocation means adding leverage. In the bull market of 2014-2015, we saw a leveraged bull and an allocation bull! Not only institutions, private equity, etc. are engaging in crazy leverage-increasing behavior, but even ordinary retail investors are gradually allocating funds and increasing leverage through offline platforms, ranging from a ratio of 3-5 times to a ratio of 10-20 times!

But when the leveraged bull market ended and the bear market began in 2015, the foresighted allocations began to flee wildly, and the latter later felt that the allocations had been affected by the stock market crash, and began to liquidate their positions one after another. Liquidation! The result is that the stock market has been falling, and the funds of institutions, private equity, funds, and retail investors can only watch the continuous liquidation of positions, but they cannot get out at all!

The biggest crisis caused by capital allocation is the impact on the liquidity of the stock market. What is more serious is that it will destroy the stability of the entire market! Therefore, in the future, the management must give top priority to cracking down on capital allocation, because the lessons are too great! ! !

So what are the benefits of capital allocation for retail investors? It’s nothing more than a greater proportion of your profit! Simply put, to turn 100,000 into 1 million, you need 10 times the room for growth. However, through capital allocation for trading, your 100,000 principal may become 500,000, or even more, so if you want to get a profit ratio of 1 million Even less! !

But what you need to know is that A-shares are a cyclical market with long-term bears and short-term bulls. It even caused too much damage to the capital allocation bull market in 2014-2015, so even if it really enters a bull market cycle in the future, forced allocation Capital is also a top priority! So those who still think about making money through capital allocation are actually using a very small winning rate to play the dream of getting rich overnight, losing more and winning less!

When giving advice to investors, Buffett warned investors in his letter never to use borrowed money to buy stocks. "No one knows how much the stock market will fall in a short period of time," he said in the letter. "Even if your borrowing is small and your position is not immediately affected by the market plunge, your sanity may be affected by scary reports and You will be blinded by panicking remarks, and you will not make the right decision if you have uneasy thinking."

In layman's terms, stock allocation means borrowing money and investing in stocks with leverage, where risks and returns coexist.

If capital allocation is used well, it will be a booster for the bull market. If it is not used well, it will be the engine of the stock market crash. We started the bull market in 2015 and allocated funds, but in the end we suffered a stock market crash because of allocating funds, and many investors suffered heavy losses.

Suppose we have 100,000 yuan in hand, and with 10 times leverage, we can use 1 million to trade stocks. A daily limit of 1 million is 100,000. If you think you have achieved 100% return on your principal, it can be said to be a huge investment income. But we must also see that with the same 10 times leverage, if 1 million hits the limit, the principal of 100,000 will be lost, and the wealth will return to zero overnight.

Moreover, the cost of stock allocation is not high, usually around 8%. If you take into account the 10 times leverage, this is a huge expense, while the allocation company is guaranteed to make profits without losing money. When your stock goes down, they will force you to close your position, and when your stock goes up, they can make a lot of money.

Therefore, in the early stages of this bull market, the China Securities Regulatory Commission strictly cracked down on over-the-counter capital allocation to eliminate this unstable factor so that our bull market can last longer.

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To put it simply, stock allocation is to find someone to borrow money to trade in stocks, but this kind of borrowing money to trade in stocks is different from taking out loans to do business.

Stock financing is similar to leveraged margin trading in the futures and foreign exchange markets.

What is margin trading: Take futures rebar as an example. Today's closing price of rebar is 3473 per ton. The first-hand rebar and contract is 10 tons, and the value is 3473x10=34730. Usually the leverage given by futures companies is 10 times, that is, you only need to pay a margin of 3,473 yuan to buy or sell one lot of 10 tons of rebar. As the price rises and falls, profits and losses are calculated based on 10 tons.

If you get the market right, you only pay one ton of money, but you reap 10 tons of rising profits.

If you made a mistake in the market, you only paid one ton of money, but suffered a loss of 10 tons of falling prices.

Let’s talk about stock allocation;

The meaning of stock allocation is similar. Find a company that allocates stock capital and agree on the interest and capital allocation ratio.

For example, if you originally had a capital of 100,000, the capital allocation company allocated 900,000 to establish a 1 million stock account. 900,000 of which needs to pay interest.

A trader uses 1 million funds to buy and sell stocks in the stock market. In a bull market, the profit level of an account with 1 million is definitely higher than that of an account with 100,000. But in a bear market. A trader with a 1 million yuan account can only lose 100,000 of his own principal. After the account reaches the predetermined risk control line, the capital allocation company will force the customer to liquidate the position and relieve his own risk. At this time, the trader's 100,000 principal may be running out. Basically, it is in a state of liquidation.

Stock allocation risks are high, which is very detrimental to the healthy development of the stock market. During the bull market in 2015, a large amount of allocation funds entered the market to push up the stock market. However, after the bull market turned into a bear market, the stock price fell, causing losses in the allocation accounts. First, some allocation accounts reached the liquidation level and were forced to close their positions; they were forced to close their positions. The funds continued to suppress the stock market; more allocation accounts were liquidated, leading to a stampede.

The state has been cracking down on over-the-counter capital allocation in the stock market because the risk of adding leverage to the stock market is greater and is not conducive to the healthy development of the stock market.

Stock allocation increases the investment risks of retail investors, and investors need to invest rationally and within their capabilities in the stock market.

Full-time trader in foreign exchange futures and stocks, founder of the asset management team. Welcome to leave a message and communicate.

Capital allocation is actually an act of increasing leverage, which is also known as borrowing money to speculate in stocks.

The benefits of capital allocation are of course obvious. When you judge the future trend of stocks accurately, capital allocation can bring you very high returns. Of course, it can also bring you very high returns if your judgment is wrong. bring greater losses.

In fact, there is nothing wrong with allocating funds. This relies heavily on your judgment of market trends. For allocation platforms, they make more stable money and only charge interest on the money you borrow. Of course, this interest rate is definitely higher than that of banks. The interest rate of conventional OTC allocation platforms is generally 7-7. between 10%.

Even with capital allocation, it is impossible for you to borrow 10 times the money from the platform. The allocation platform is also risk-controlled and risk-aware. When doing capital allocation, you generally need to have corresponding assets as collateral. It is impossible to have too many assets beyond yours.

In fact, the financing of securities companies is essentially the same as capital allocation. They are all levered on the basis of their own assets. If their own assets increase through leverage, the amount of their own financing will be It will also rise accordingly. In this process, the securities company charges customers an interest of between 5-7%.

Therefore, capital allocation should also be viewed dialectically. It is just a tool. If you can accurately judge the market trend, then capital allocation is a tool for you to amplify your profits. Of course, if you are not that capable and still allocate funds crazily, then once your judgment is wrong, the losses will be very heavy. Capital allocation is just a tool, the most important thing is the people who use it.

Borrow money to speculate in stocks, and borrow money to speculate in stocks with added leverage. Stock allocation is to use leverage to expand the purchasing power of own funds, in order to achieve the purpose of leveraging multiple profits.

After many years of domestic trading in the stock market, everyone is no longer unfamiliar with capital allocation, and has learned to use capital allocation to master more funds to purchase more stock chips to gain market share. profit. However, leverage itself carries risks. If you use it well, you can quickly obtain multiple profits in the short term. Otherwise, you will suffer huge losses with only funds used for capital allocation. Capital allocation is a double-edged sword.

For those who make good use of leverage, capital allocation has the following benefits:

1. Based on the original funds of your own stocks, your investment can be expanded several times according to your needs. The above is used for stock trading (for example: originally it was only 100 yuan, but through capital allocation, you can buy 1,000 yuan of stocks, or more stocks, and the capital utilization rate is significantly improved).

2. As stock investment funds increase, profits will also increase several times as the funds expand. (For example: the profit of 100 yuan for a daily limit board is 10 yuan. If 100 yuan is allocated into 1,000 yuan, the profit for a daily limit board is 100 yuan. The profit is huge and clear at a glance)

3. Stock allocation The interest cost of funds is relatively low. (Some financing companies charge interest on a daily basis, and some charge interest on a monthly basis)

4. Capital allocation also helps to increase the activity of the stock market and improve the liquidity of the stock market.

5. Legal and compliant capital allocation is also allowed by the market.

6. Meets the needs of investors who have small funds but want to buy more stocks.

7. The capital allocation company has strict risk control. The capital allocation company has its own forced liquidation line, which can prevent you from stopping the loss and leaving the market in time when encountering an accident.

If the stock allocation is used properly, it will be very profitable, but if it is not used properly, it will be harmful. Expanding leverage means expanding risks, and the legality and formality of the capital allocation company must also be considered, and any capital allocation platform that is subject to supervision and management in the country must be selected. When choosing capital allocation leverage, you must consider your own situation and choose a proportion that matches you, so as to avoid increasing your burden due to investment failure. Everything in the world has two sides. To choose the good side, you must control the bad side. Whether to use it or not is entirely up to the investor himself.

There are no advantages to stock allocation, only disadvantages. Why?

First, let’s first talk about what is stock allocation?

Give an example. There is a stock investor who uses 100,000 yuan as his principal, which is his own money, and then borrows 300,000 yuan through stock allocation. He uses his own principal of 100,000 yuan plus a loan of 300,000 yuan, for a total of 40 Ten thousand yuan to buy stocks. The theoretical advantage of this situation is that if the stock of 400,000 yuan rises by 25%, your profit will be 100,000 yuan.

Your principal is actually only 100,000 yuan, which is equivalent to realizing a 100% profit. But the key problem is that if it falls by 25% from 400,000 yuan, your principal will also disappear.

The first point is a real case. In the first half of 2015, many investors had their accounts blown up due to allocation reasons. Not only did they not have profits from the bull market, but they entered a bear market in the second half of 2015. , causing one's principal to be wiped out.

The second point is that after doing stock allocation, through such financing, the risk is infinitely magnified, and the income is also magnified. Through the last round of bull market, many capital allocation results show that Often, instead of enjoying the benefits and sacrificing their own principal, they have to face painful risks, leading to the disappearance of their principal.

The third point is that if you do stocks and allocate stock funds, you have no way to control your mentality. You will also be very worried when you see the rise, because after all, you are borrowing money to buy stocks. The pressure will be even greater if it falls. Without a good mentality, it is impossible to achieve profits through stocks.

The fourth point, Buffett said something called stock investment, there are three most important points. The first point is not to lose money, the second point is not to lose money, and the third point is to remember the first two points. Once you allocate capital, it is easy to suffer losses, and the magnitude of the loss is relatively large. This kind of risk is beyond the control, face and tolerance of ordinary people.

Fifth point, Buffett also said that the funds for stock trading must be your own spare funds and must not be used in the long term. He also said that if you are not willing to hold a stock for ten years, please do not hold it for ten minutes. If you buy stocks after allocating funds, you will have no chance to hold them for ten months during the decline, because your principal will be wiped out.

To summarize briefly, stock allocation has no advantages, only disadvantages, and the disadvantage is that it will accelerate the disappearance of your principal and accelerate your mentality to become bad. Everyone must remember that you must not borrow money to do stocks. Money, not even a penny, can be borrowed.