There is a sad fact in China, that is, 70% of investors will lose money. There is an old saying in the stock market called "seven losses, two equalities and one gain", that is, 70% of investors will lose money, 20% of investors will not gain or lose, and only 10% of investors will be profitable. This is not empty talk. It is based on facts.
We all know that money funds are the investment with the lowest return and the lowest risk. However, many investors who invest in money funds outperform those who invest in stock funds. Some investors who invest in stock funds still lose money after years of investment. It is very appropriate to say seven losses, two equalities and one gain in the stock market.
Why do most people lose money investing in stock funds? The reason is very simple. Most investors start to invest in stocks when the bull market has risen a lot and it is expensive. People have the instinct of chasing profits and avoiding risks, and they want to buy more stocks when they see the rise of stocks. I believe many investors have such experience. After the bull market, we have more friends talking about the stock market. It is because most people begin to invest in stocks at this time that most people lose money.
We all know that the more the bull market goes up, the more new investors will enter. The worst thing is that investors who join the bull market when it reaches its peak do not eat it when it goes up, but experience it when it goes down. If you buy too much, you will not make money. When people buy vegetables and mobile phones, they want to buy them when they are cheap, but when they buy stocks, they forget about this. On the contrary, after the big rise, the more expensive the stocks are, the more people will buy them. This is why most people do not make money investing in the stock market.
We can see from the trend of major index funds that most domestic indexes are rising in the long run, and most investors do not make money because they do not invest in stocks. Many investors started to invest when the bull market was very high. They bought very expensive, so they could not make money.
For index funds, their long-term returns are good, but they also need to buy when the index funds are cheap, and invest in an undervalued period of time, so that the returns will be good. So the question is, how can we judge whether index funds are expensive or cheap? That needs to be judged by "valuation indicators".
