The Borg formula is a very useful investment formula in investment. Using the Borg formula, we can find the most suitable fund varieties for our investment, but the Borg formula is not suitable for all fund varieties. At this time, a variety of the Borg formula was born. What is the variety of the Borg formula, and what are its application conditions? Let's study together.
Sometimes the Borg formula will encounter obstacles. Why? If the profits of the constituent stocks of the index fund decline, or the profits of the constituent stocks of the index fund change periodically, the Borg formula will become invalid. This is because the decline or loss of the company's profits will lead to the loss of reference value of profits. In this case, we can use a variant of the Borg formula.
指数基金的未来年复合收益率=指数基金的年市净率变化率+指数基金的年净资产变化率
The change of stock price during the investment period depends on the change of P/B ratio and the change of the company's net assets B. That is, P/B ratio and net assets jointly affect the change of stock price.
When the profits of constituent stocks of index funds are unstable or cyclical, but the company is profitable even in the worst case, a variant of the Borg formula can be used.
We can find that there is a difference between the variant of the Borg formula and the Borg formula. The main difference is that there is no dividend yield, and the valuation index of P/B ratio is used. Why does the variant of Borg's formula not consider dividend yield? This is because dividends are a part of profits. If the company's profits are unstable, it is difficult for index funds to distribute dividends. Therefore, there will be no dividend yield in this case.
However, the use of P/B ratio in the variant of Borg formula is also conditional, that is, although the company's profits are unstable, it will not lose money in the most difficult time of operation. Such a company's net assets are guaranteed, so it can obtain the income brought by the rise of the price to book ratio.
Summary of valuation methods. According to the profitability of the company, the company can be divided into four types of companies, and their corresponding investment methods are also different:
1. Companies with relatively stable profits , which is suitable for direct use of the profitability method, that is, the quick judgment version of the Borg formula. This kind of investment is less difficult, low risk, and has dividend income in the holding process, which is most suitable for ordinary investors to enter;
2. Companies with high profit growth, It is suitable to use the Borg formula to judge investment and make investment by referring to the P/E ratio. This kind of investment is more difficult and requires analysis of relevant data, which is time-consuming and laborious;
3. Profitability is unstable or cyclical, but it is profitable even in the worst case Such a company is suitable for a variant of the Borg formula to judge investment and make investment with reference to the price to book ratio. This application is much more difficult and needs to analyze more relevant data;
4. Long term loss making company There is no need to invest, just give up.
Friends who invest in stocks have heard of four different types of stocks: value stocks, growth stocks, cycle stocks, and distressed stocks. The application of the above four valuation methods corresponds to these four types of stocks. For indexes, they can also be divided into value index, growth index, cycle index and dilemma index.
For the value index, we only use the profitability method for investment, which is simple and effective.
The growth index makes it more difficult to invest. We can try it after we have some investment experience.
Cyclic index, very difficult, not recommended for novice investors.
We can give up the dilemma index directly.
When we invest, we should choose the corresponding varieties according to our own actual situation. For example, the varieties with low tolerance to fluctuations can be better chosen if we can choose the profitability method.
But there are many undervalued index funds when investing in index funds. How should we choose them? It is suggested that novice investors try to invest in undervalued broad base index funds.
Many investors believe that the more volatile the varieties, the better. In fact, the more volatile the varieties, the less profitable the investors are. Because it is more difficult to adhere to the big fluctuations, the novice suggests investing in broad base index funds. After having rich investment experience, you can consider strong cyclical varieties. Investment is a difficult thing. We cannot create difficulties without difficulties.
