Value investment is the ideal investment method that many investors are pursuing, but what is the value investment theory? What is Graham's favorite value investment valuation indicator? Let's learn together.
Two characteristics of value investment:
1. Have ability circle and can judge the approximate value;
2. Keep enough margin of safety to buy at a price lower than the value.
Our investment in index funds also follows this principle. If we invest in a variety, but we buy it expensive, it is not value investment. If we think a variety is cheap, but do not understand it, it is not value investment. Only when we know a variety and buy it when its price is lower than its value, can we call it value investment.
用一句话概括就是：能力圈+安全边际=价值投资
Whether it is a stock or an index fund, we need to improve our ability circle to judge whether the current stock or index fund is at a stage where the price is lower than the value.
Graham has a profound understanding of value investment. He likes to use the profitability as a valuation indicator to make value investment. We all know the calculation formula of profitability:
盈利收益率=公司盈利/公司市值
This formula originated from Graham and was later used by the Federal Reserve to measure the overall valuation of the stock market. The profitability is just like that we regard buying stocks as a special financial product. The profitability is the profitability of this financial product. For example, on April 9, 2018, the profitability of the Shanghai Stock Exchange 50 Index Fund was 9.26%. This means that after you invest in the Shanghai Stock Exchange 50 Index Fund, your return is 9.26%.
However, there is a limitation to the use of the profitability method, that is, the companies behind the index must be in a stable profitability state for a long time. This is because the numerator of the profitability rate is the company's profitability. The more stable the profitability is, the more effective the profitability rate will be. Small companies with unstable profitability cannot use this formula.
But what is profit stability? The profit stability requires that the profit changes little every year. If the profit increases or decreases significantly in the short term, it is not suitable to use the profit yield. What are the varieties suitable for the use of profitability at present? Generally speaking, the profits of broad base index funds are relatively stable. For example, Shanghai Stock Exchange 50 Index, Hang Seng Index, H-share Index, Shanghai Stock Exchange Bonus Index, China Stock Exchange Bonus Index, Fundamentals 50 Index, CCTV 50 Index, 50AH Preferred Index, etc.
When investing in a variety, will the valuation indicators and valuation methods change? It can be changed under some special conditions. For example, wars and natural disasters may change a country's business prospects, so buying an index is buying a country's luck. However, in general, the valuation indicators and methods suitable for the index will not change significantly.
