We all know that there are three influencing factors and two difficulties in the Borg formula. We can formulate excellent investment strategies by studying these factors and difficulties, so that we don't have to calculate the Borg formula accurately, and we can also get good returns. So how can we use the Berger formula to invest?
1. Buy when the dividend yield is high;
2. Buying when the P/E ratio is low;
3. After buying, wait patiently for the "mean reversion", that is, wait for the valuation from low to high.
Generally speaking, when we buy when we are undervalued, we will change from low to high within one to three years. This is the investment skill we need to master when we apply the Berger formula.
It should be noted that the history of domestic A-shares is relatively short, and most indexes have only a history of more than ten years. With the change of time, the future earnings, policies and other conditions of enterprises may change greatly, and the corresponding valuation fluctuation range will also change accordingly. You can pay attention to the public account "Fixed investment earns ten times in ten years" to obtain the fluctuation range of index fund valuation.
Both the Borg formula and the profitability method are tools that can help us make better investments, but what is the relationship between them? In fact, the principle of the two is the same, why do you say so?
Profit rate method fixed investment strategy: start fixed investment when the profit rate is high, and stop fixed investment when the profit rate is low. But profitability and P/E ratio are reciprocal. When the profitability ratio is greater than 10%, the P/E ratio is less than 10. For most indexes, the P/E ratio is less than 10, which is in the lower area of the historical P/E ratio fluctuation range, meaning that the future P/E ratio is likely to rise.
盈利收益率和股息率的关系：股息率=分红比例×盈利收益率
Generally, the dividend ratio of index funds does not change much. It can be seen from the formula that when the profitability is high, the dividend yield is high. To sum up:
When the profit yield is greater than 10%, the P/E ratio will rise;
When the profitability is high, the dividend yield is also high.
The rising P/E ratio, the high dividend yield, and the future corporate profits constitute the Borg formula. Therefore, the earnings yield method is used to obtain: the earnings from the high probability of P/E ratio rising and the initial high dividend yield, plus the earnings from the future earnings rise, we will finally obtain good earnings. In other words, the profitability method is a quick judgment version of Borg's formula. Therefore, the profitability method and the Borg formula were created by two masters respectively, but in fact, they came to the same end by different routes.
