The Borg formula can help us make effective investments and obtain higher returns, but there are also two difficulties in using the Borg formula. How to use and control these two difficulties? Let's study together.
We all know that the Borg formula is:
指数基金未来的年复合收益率=指数基金的投资初期股息率+指数基金的年市盈率变化率+指数基金的年盈利变化率
If we want to accurately calculate several variables in the Borg formula, it is difficult for ordinary investors to do so. What we can grasp is the dividend rate at the initial stage of investment, as well as buying when the P/E ratio is low, and selling when the P/E ratio is high. But there are also two difficulties that investors need to understand.
There are two difficulties in applying the Berger formula to investment:
1. It is difficult to predict the future profit growth: How much money the enterprise can earn in the future is the future situation, so there is no way to accurately predict. An approximate estimation method is to take the historical profit growth rate of the past 10-15 years, and then make a discount on this basis to reserve a sufficient margin of safety. For example, the profit growth rate of American shares in the past century was about 10%, that of Hong Kong shares in the past 50 years was about 12%, and that of A shares in the past 20 years was 13%. The profit growth rate mentioned here is a long-term average. The past ten years have been a period of rapid development of the domestic economy. The future profit growth may not be so fast, but it will certainly be.
2. How to determine the fluctuation range of valuation: We have no way to predict how the future valuation will change, but we don't need to know the specific volatility, we just need to know a general range of volatility, and then reserve enough margin of safety to use. There are many research conclusions about the fluctuation range of valuation. Peter Lynch, the most famous American fund manager, believes that when the P/E ratio is less than the profit growth of future enterprises. The enterprise has good investment value.
We find that the P/E ratio of most indexes can be lower than the profit growth rate when they are low. This is a qualitative analysis and valuation method. The P/E ratio will fluctuate in a range around a certain value of the profit growth rate. This analysis method is qualitative, but it is not accurate. We need to keep enough safety margins when using it, But it can help us to measure the relationship between future P/E ratio and earnings growth.
