Today, let's discuss a rather harsh topic about whether the returns have outperformed the index.
There happens to be an account with a return of 16%, slightly higher than the increase in the ChiNext index in February, but lower than the increase in the STAR 50.
It then shows that it has outperformed 78% of investors.
That is to say, in February, if you had fully invested in the ChiNext index and just laid flat for a month, your return could outperform 78% of investors.
I did some data statistics for February.
In February, the Shanghai Composite Index rose by 8.13%, the Shenzhen Component Index by 13.61%, the ChiNext index by 14.85%, and the STAR 50 by 17.94%.
Other broad-based indices.
The SSE 50 increased by 7.05%, the CSI 300 by 9.35%, the CSI 500 by 13.83%, the CSI 1000 by 11.69%, the CSI 2000 by 5.97%, the SME Board Index by 13.99%, the ChiNext 50 by 15.46%, the STAR 100 by 16.09%, and the Beixin 50 by 9.73%.
The largest increase was the STAR 50, close to 18%, and the smallest increase was the CSI 2000, close to 6%.
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The STAR 50, the core listed companies of the Science and Technology Innovation Board, and the CSI 2000, a big data sample of small and micro enterprises.This also illustrates the main direction of this round of market trends, focusing on high-quality listed companies in the science and technology innovation sector.
Many people seem to have perceived certain directions after the New Year, such as the significant increase in micro-cap stocks. However, the actual representative of micro-cap stocks, the CSI 2000, performed underwhelming throughout February, with the overall micro-cap index falling by 3.75%.
The indices that truly made money were still concentrated in high-quality science and technology innovation enterprises.
In fact, most retail investors did not outperform this index in February and failed to achieve an 18% return.
The main reasons for not outperforming the index are as follows:
1. Incorrect judgment of the overall direction.
A significant number of people made incorrect judgments about the overall direction.
In early February, there were many who believed that the index would fall below 2600, even to 2500-2400.
There were also those who were empty-handed before the holiday, holding cash for the festival, resulting in missing the bottom.
Including the rapid rise after the holiday, some people began to reduce their positions, believing that it could not reach 3000 points.When you are subjectively bearish, your trading behavior becomes distorted.
If the overall direction is judged incorrectly, not only will you fail to outperform the index, but you may also be losing money throughout February.
If February ends up being a losing month, there is too much that needs to be adjusted. There is a fundamental error in the judgment of the market, and it is necessary to correct it quickly.
Otherwise, it is not suitable to trade in the market, because in March and April, more serious mistakes and judgments may occur.
2. Position control errors.
Some people have not been able to outperform the index because they have made some mistakes in position control.
The bear market mindset has not been changed, and they are still operating with a low position.
Although they did not miss the rise, they were always afraid of the rise, and the position was reduced quickly.
After a sharp rise, they reduced their positions, and as a result, the position continued to rise, and the position became lower and lower.
Around 3,000 points, there are also many people who are persistently waiting for a pullback, and then reducing positions or even going short.The market that has not understood the transition from weakness to strength will not turn back. Those who do not understand that volatility is an opportunity to get on board will definitely make mistakes in their positions.
Moreover, these investors are not very willing to chase the high position, and their positions will always be at a low level.
In this round of the market, if the long-term position is kept below 50%, it is very difficult to outperform the entire index.
3. There are problems with the selection of the sector.
The selection of the sector is also a top priority.
The broad-based index itself has a big difference, but if it involves the sector, the difference is even greater.
It is obvious that the sector with the largest increase in February is the technology main line.
The main line of artificial intelligence, the increase is obviously more than the increase of the entire index.
In artificial intelligence, the computing power sector and the CPO sector are even more obviously stronger than the increase of the entire AI.
But there are some sectors, the increase in the entire February is quite worrying.For example, the entire banking sector only rose by 3.83%, which is considered very weak because it had a strong increase in January.
Choosing sectors that have previously fallen sharply and selecting sectors with good elasticity is the most important thing to do at the beginning of the market trend.
Some more defensive sectors will have relatively poor elasticity.
When choosing sectors, one should be cautious, otherwise, it is easy to miss the market trend.
4. There are problems with the trading rhythm.
There are also some investors who actually see the market trend and wait for it, but they don't make money.
The reason is very simple, there is a significant problem in the trading process.
The reason for the trading rhythm going wrong is due to subjective judgment of the market trend.
For example, when the index first appeared with eight consecutive days of rising, most investors thought it was impossible.
So, there were a lot of people reducing their positions after three consecutive days of rising, four consecutive days of rising, let alone after the last six, seven, and eight consecutive days of rising.The mid-course adjustment, in fact, only happened once, but many people believed that the adjustment would be very deep and would take a long time.
As a result, they made a large-scale reduction in their positions to wait and see, and then missed out.
The trading rhythm itself comes from the grasp of the market direction and the judgment of short cycles.
Once a mistake is made and a trade in the opposite direction is made, it is definitely a total failure.
Including many investors who like to do T, but T after T, many good stocks have disappeared.
5. Emotional management is not in place.
The last important reason is the problem of emotional management.
The essence of many people's losses is not that they can't see the market clearly, but that they can't manage their emotions well.
It's like knowing that the more you buy when it falls, the more it is the right thing to do, but near 2635, emotions completely collapse and they directly clear their positions.
There are quite a few people like this.Such mistakes are absolutely not permissible, as they will directly lead to significant actual losses and a collapse in mentality.
Once the market picks up, it is destined to doubt oneself, which will then affect the subsequent trading emotions.
Emotional trading is the main reason for retail investors to lose money, whether in a bull or bear market, managing emotions is the top priority.
The above points are the most common problems encountered by retail investors when trading stocks, and are also the core reasons why retail investors cannot outperform the index.
Finally, let's talk about a key point.
In fact, the ultimate destination for retail investors is to join the index and achieve returns beyond the index.
If you have seen clearly that the direction with the largest increase in this round of the market is the ChiNext and the Science and Technology Innovation Board, then just buy the index in this direction.
Ultimately, starting from the lowest point, the increase in these two sectors will exceed 40%, and even reach 50%.
For retail investors, is a return of 40-50% still not satisfactory?Even after deducting some of the previously accumulated losses, an actual return of 20-30% is still considered low, isn't it?
More importantly, buying index ETFs eliminates the need for constant worry and excessive trading, ensuring more effective risk management.
Individual stocks may seem to have greater fluctuations and more opportunities, but for retail investors, they are actually a poison.
The main force in individual stocks aims to earn excessive returns, and where does this excessive return come from? It comes from stripping the skin off retail investors.
Therefore, even when a bull market comes, retail investors find it difficult to leverage their trading advantages to earn excessive returns.
Most of the time, being content with keeping up with the index's returns should be enough.
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