When we invest in index funds, we always choose undervalued index funds to invest, so that we can get good returns from long-term investment. But can index funds be bought when they are undervalued? What if the index fund is undervalued and loses money? Next, we will explain what to do when the index fund is undervalued.
Further reduce losses through fixed investment
If the undervalued index fund we invest in drops by 30% at most, we will lose much less than this figure if we make a firm investment, because in the process of decline, we will stick to the firm investment, and the cost will be pulled down. If the index fund itself falls by 30%, we will definitely invest, and the floating loss can usually be controlled between 10-15%. Moreover, the longer the floating loss lasts, the more the index fund falls, and the faster the cost is reduced. The index fund rises for a long time. After the cost is lowered, the index fund rises slightly, and it is easy to turn losses into profits.
We insist that fixed investment can effectively reduce costs when falling. After that, the fund does not need to rise back to its original position, and we can also get good returns. This is the smile curve of fixed investment.
In an area where the index fund is undervalued, is it a one-time purchase or a batch fixed investment?
It is better to invest in batches. This is because investors have limited tolerance for losses. According to the survey, most investors can withstand floating losses within 20%. If the floating loss exceeds 20%, many people will collapse. Index funds also fluctuate by 30% when they are undervalued, so buying in batches is more suitable for most people. If the investment is fixed in batches, the loss will be controlled within 10-15%.
In addition, undervaluation is a region, not a point. If you buy in batches in this region, you must buy an undervalued price. If the market falls, the purchase cost will be lower. But once you buy, the buying point is fixed, and you may not be able to buy a lower position. People are vulnerable to the subjective influence of emotions. Batched investment can avoid the interference of such subjective emotions, which is conducive to long-term investment.
