Banking screws share a true comparison in the book: "When the Shanghai and Shenzhen 300 was overvalued in 2021, investors A took profit at the valuation and earned 40% of the profit; investors B felt that it could still rise, so they insisted on holding it. In 2022, the index fell 25%, and the return was only 8%; investors C sold as early as 10%, and only made a little 'small money' - they were also undervalued to buy, with different ways to take profits, and the final return difference was 3 times."
Stop profit is the "last mile" of index funds investment, and it is also the most prone to errors: selling too early and making less profits, and selling too late and doing nothing. In this article, we first dismantle the three common misunderstandings of stopping profit, and then talk about the two core strategies of "target stop-profit" and "valuation stop-profit". Finally, we explain "how to use money after stop-profit", and help you keep the undervalued buying returns.
1. Break the misunderstanding first: 3 stop-profit "wrong moves" to make profits lose in vain
Banking screws are summarized in the book: More than 65% of investors will make "floating profits" difficult to convert into "real profits" and even suffer losses due to the following 3 misunderstandings.
1. Misconception 1: "Sell when you make a little profit, and stop when you see the good" - Miss the long-term big market
Some people think that "it is safest to put the bag in". As long as you see the account profit (such as 5%-10%), you should redeem it quickly. For example, if you buy 300 in Shanghai and Shenzhen in 2020, you should sell it if you make 8%, and miss the 32% return that continues to rise in 2021 (Data source: CSI Index 2024).
Banking screws point to see through the essence:"The income of index funds comes from 'undervalued to overvalued valuation repair + long-term profit growth'. If you make 10%, you only sell it, and you only eat a 'fragment' and don't get the 'main upward wave' - it's like planting crops, harvesting as soon as the seedlings grow, and not waiting for maturity, so there is naturally not much harvest." According to the 2024 backtest, the Shanghai and Shenzhen 300 has an average return from undervalued to overvalued 300 (about 2-3 years) from undervalued to overvalued 300, with an average return of 35%-50%, far higher than the income of "making 10% and selling".
2. Misconception 2: "Greed is caused by, overvalued and not sell" - Revenue is given after the callback
Some people see that the continued growth of returns, and they think that "it can rise higher." Even if the index enters the overvalued range (PE percentile > 70%), they are unwilling to sell. For example, in 2021, the Shanghai and Shenzhen 300 PE percentage reached 85% (overvalued), and an investor held a 50% return, but wanted to "wait for 60% to sell". As a result, the index fell 25% in 2022, and the income was given back to 12%, which wasted more than a year.
Data warning for bank screws: "The index will not keep rising, and it will inevitably pull back to a reasonable range after overvalued. - From 2014 to 2024, the PE percentage of the Shanghai and Shenzhen 300 exceeded 80% each time, and the probability of a pullback within 1 year is 80%, and the average pullback is 22%. " Don't sell when overvalued, just like "not willing to go down the mountain at the top of the mountain", it is likely to "slide back to the hill from the top of the mountain", and the previous returns are in vain.
3. Misconception 3: "Money is idle after taking profit, missed the next opportunity" - There is no closed loop of funds
After someone takes profit, puts the money in the current account, or blindly invests in other high-risk products (such as individual stocks and industry funds), the result will either be "low returns and cannot beat inflation" or "lose money and throws back the previous profit."
The book gives a negative case: In 2021, an investor took the profit of 300 in Shanghai and Shenzhen, and obtained a profit of 200,000 yuan. He did not make any plans and followed the trend and bought a fund in a certain industry. He lost 30% in 2022. Not only did he lose all the profit of the profit, but he also lost 50,000 yuan in principal. Bank Screw emphasizes: "Stop profit is not the 'end', it is the 'start of the next round of investment' - money should be placed in places where 'can quickly access the next round of undervalued opportunities', such as money funds and short-term bond funds, and cannot be idle or invested randomly."
2. Core take-profit strategy: 2 methods to adapt to different needs
Banking screws mainly promote the "target take-profit method" (suitable for novices) and the "valuation take-profit method" (suitable for advanced investors). The two methods have their own focus and can be selected based on their own risk tolerance and time and energy.
1. Strategy 1: Target take-profit method (first choice for beginners) - Set fixed income targets and sell when you reach the point
Core logic: Set a "yield target" in advance. When the fund's cumulative income reaches its target, it will be redeemed in full or partially. It is simple and easy to operate, and there is no need to focus on valuation.
(1) How to set goals? Determine the return based on the "investment cycle"
Banking screw suggestions: "Target returns should match the 'investment cycle', short-term (1-2 years) goals should be lower, long-term (2-3 years) goals should be higher, avoid 'the goal is too high and the goal is too low to make money'." Combined with the 2024 data, reference for common goal settings:
(2) Practical steps: divide "single profit" and "single profit in batches"
Single-time take-profit (suitable for beginners): For example, invest in Shanghai and Shenzhen 300, set a target income 30%, after buying, when the cumulative income reaches 30%, directly redeem all shares and put them in the pocket;
Case: In October 2022 (PE percentile 15%), the profit reached 30% in May 2024, and after redemption, he received 130,000 yuan to avoid possible subsequent pullbacks.
Stop profit in batches (suitable for investors who are afraid of selling fly): Set target returns 30%, when the income reaches 20%, redeem 50% of the share; when the income reaches 30%, redeem the remaining 50%, which not only puts some of the profits, but also retains part of the share to deal with possible increases;
Case: Buy 100,000 yuan in 2022, earn 20% (120,000 yuan), and redeem 50,000 yuan in 2024; follow-up income reaches 30% (130,000 yuan), and redeem the remaining 50,000 yuan, and the total income is 30,000 yuan, which is more profitable than a single take-profit.
2. Strategy 2: Valuation take-profit method (advanced first choice) - Look at PE percentiles, sell when overvalued
Core logic: No fixed income target is set, but look at the index valuation. When the PE percentile enters the "overvaluation range", it is gradually redeemed, which is more in line with the law of index fluctuation and can get "complete valuation repair returns".
(1) First clarify the "overestimation interval": different index thresholds are different
Combined with the 2024 "Index Valuation Report" of CSI Index Company, the overvaluation threshold reference for common wide-based indexes:
(2) Practical steps: "Redeem in 3 batches, no clearance at one time"
Banking screw emphasizes: "The overvaluation range is a 'range' not a 'point', and one-time clearance may be sold in the 'early overvaluation stage', and subsequent rises are missed; redeem in 3 batches, and can take into account both 'falls' and 'making the last profit'." Specific steps:
The first batch of redemption (PE percentile just overestimated): For example, Shanghai and Shenzhen 300 PE percentile reaches 70%, redemption of 30% share;
Batch 2 (Percentile moderate overestimation):PE The percentile reaches 75%, and then redeem 30% of the share;
Batch 3rd batch redemption (PE percentile height overestimation):PE The percentile reaches 80%, and the remaining 40% share is redeemed;
Case: In 2021, the Shanghai and Shenzhen 300 PE percentage reached 70% (1st batch redemption 30%), 75% (2nd batch redemption 30%), 85% (3rd batch redemption 40%), the average redemption income reached 42%, earning 12% more than "one-time redemption 70% redemption" (Data source: CSI Index 2024 annual backtest).
3. Fund processing after taking profit: 3 ways to connect to the next round of investment
Money cannot be "idle" or "indiscriminately invested" after taking profit, and should be placed in the place where "safe and can quickly access the next round opportunity". The bank screws give 3 treatment methods in the book to adapt to different needs:
1. Method 1: Transfer currency/short-term bond funds, wait for the next time to undervalue (recommended for beginners)
Operation: After taking profit, transfer funds to money funds (such as Yu'ebao) or short-term bond funds (such as China Merchants Xinfu Medium and Short-term Bonds). These products have low risks (short-term bond funds have annualized returns of approximately 3.2% in the past 5 years, CSI Index 2024), and good liquidity;
Logistic: Wait until the target index enters the underestimated range again (such as Shanghai and Shenzhen 300 PE percentile <30%), then transfer funds to the index fund to form a closed loop of "stop profit → wait → buy again";
Case: 2021 take profit Shanghai and Shenzhen 300, funds are converted to short-term bond funds, and rebuy when the index is undervalued in 2022, making 6% more transitional returns than "stop profit and idle current situation".
2. Method 2: Sub-invest other underestimated indexes, decentralized configuration (suitable for advanced)
Operation: If the current index is overestimated, but other indexes are still underestimated (such as Shanghai and Shenzhen When 300 is overvalued, CSI 500 is still undervalued), it can divide the take-profit funds into an undervalued index fund for 3-6 months;
Logic: Avoid "issue of funds" while dispersing single index risks, such as In 2021, the Shanghai and Shenzhen 300 was overvalued (PE 85%), the CSI 500 was still undervalued (PE 22%), and the take-profit Shanghai and Shenzhen 300 invested in the CSI 500. In 2022, the CSI 500 fell by 8% less than the CSI 300;
Note: Only invest in "broad-based index", not industry / Theme index to avoid risk in the industry.
3. Method 3: Partial use is used as living expenses, partly retained investment (suitable for rigid needs)
Operation: If you have short-term living needs (such as travel or home appliance replacement), you can withdraw 30%-50% of the take-profit income and use it as expenses, and the remaining funds will be processed as "Method 1" or "Method 2";
Logic: The ultimate goal of investment is "Serve life", appropriately withdraw income and improve life, while retaining part of the funds to continue investing, taking into account both the "current" and the "future";
Case: Take-profit income of 200,000 yuan, withdraw 8 For purchases of 10,000 yuan, the remaining 120,000 yuan will be converted into short-term bond funds. I will invest later when I undervalue it.
IV. Case comparison: What is the difference in returns when different take-profit methods?
Bank screws were backtested in the book using the 2019-2024 Shanghai and Shenzhen 300 data to intuitively show the impact of the take-profit method on profit (initial investment of 100,000 yuan):
Data source: China Securities Index Company 2024 Backtest Report
Conclusion: Valuation take-profit (3 batches) has the highest returns, but it requires a certain amount of energy; the target take-profit is suitable for novices, and the returns can also outperform "sell randomly"; the most taboo is "sell just by making a little profit" or "overvalue not to sell".
5. 2 core enlightenment for ordinary people
1. "The core of stop-profit is to 'observe the rules', not 'guess the market'"
Banking screws say in the book: "No one can accurately predict the 'highest point', but can set the 'take profit rule' through 'target' or 'valuation' - Sell by the rules, even if you don't sell at the highest level, you can get most of the profits; if you don't sell by the rules, you may 'either make less or lose'." Rules are the best tool to "fight greed and fear".
2. "Index fund investment is a 'closed loop', not a 'one-time operation'"
From "Select broad-based fund" → "Unvalued buying" → "Scientific take-profit" → "Fund planning after taking profit", it is a complete closed loop. Bank Screw emphasizes: "Don't regard 'stop profit' as the 'end', but as the 'start of the next round of investment' - Only by forming a closed loop can we rely on index funds to accumulate wealth in the long run and achieve the goal of 'steady value-added'."
This book ends
From "">From "Basic cognition of index funds" (difficult to broad foundations from industry funds), to "4 steps to select high-quality broad foundations" (tracking error, fee rate, scale, establishment time), from "finding time with PE percentiles to find undervalued opportunities", to "undervalued batch buying method", and then to the final chapter "Scientific take-profit and fund planning", we used 5 articles to disassemble the core logic of the "Index Fund Investment Guide".
The ultimate value of this book is not to teach you "make quick money with index funds", but to help you establish a "stable and replicable investment system" - it does not require you to understand complex financial knowledge, and you do not need to focus on the market every day. Just follow the rhythm of "selecting the right fund → buying undervalue → selling overvalue" and follow the market rules.
For ordinary people, the key to investing in index funds is not "how much to earn", but "No loss, stable profit, long-term profit":Don't be greedy for short-term high returns, don't be afraid of market fluctuations, follow the rules, and let "time + compound interest" help you accumulate wealth slowly.
If you are confused about the capital planning after taking profit and the next round of undervaluation judgment, you can refer to the logic of "valuation tracking + capital closed loop" in the book to find the rhythm that suits you.
(Statement: This article is for readers' reference only and does not make any investment advice)
