Did investors make money in the bull market?

The answer is that most investors not only did not make money, but also suffered heavy losses.

In the early month of bull market, most investors reduced their stock positions. It's not hard to understand. After so many years of waiting, the money of stock is finally safe.

But in the peak of the bull market, a large number of investors could not help entering the market and bought at a high level. Next, the bull market ended and the market turned downward. After just a few months, people were so worried that many people chose to leave. Whether they choose to sell or hold on, they have lost a lot of money.

The fund market is also like this. According to statistics, most funds are redeemed when the market starts to rise, and then many people apply for a large number of purchases near the peak of the bull market.

How to value the stock?

Most of people are unable to evaluate the market, enterprises or stocks correctly.

The stock is equivalent to the ownership of a company. If we hold the stock of a company, we will enjoy the wealth it creates. The stock we hold is certainly valuable, but what is its specific price?

For example, let's look at a real case. There is such an enterprise. Its products are good and its management is reliable. Its brand is recognized by many people. Of course, it meets many strong competitions in the industry. Its revenue in each fiscal year from 2018 to 2020 is 265.6 billion, 260.2 billion, and 274.5 billion dollars; The net profits were 59.5 billion, 55.3 billion and 57.4 billion dollars - basically unchanged. How do you think its share price will change?

In fact, this company is the world's most famous company, Apple. After these three years, the lowest price of Apple's stock is about $35 and the highest is close to $140. The difference is several times.

Many investment masters said: most of the time, I don't know whether my stock is expensive or cheap, but only I know in some extreme cases. This is because the price of financial assets is relatively vague.

What's more, because of the "marginal pricing" feature of the financial market, the price you see at the extreme moment is often set by the persons who don’t know the value of stock.

What determines the stock price?

The stock price is determined by two factors, one is the internal value of the company, the other is the valuation. Valuation is the fundamental reason for the sharp fluctuations of stock prices in the short term.

Investors can hardly see the internal value of the company. It is hidden in the company and economy. Entrepreneurs and employees work together to meet the needs of customers and the profit growth of the enterprise. They make products one by one, write codes one by one, and accumulate orders one by one.

The internal value is objective, but the expectations and emotions behind the valuation are subjective. Facing the same enterprise, it is difficult for us to make a correct valuation. At the same time, our emotions will also be affected by other market participants and we always switch between greed and fear, which will further affect our behavior.

Therefore, we need a knowledge system as the basis for decision-making, and control our emotions so that it will not erode this system.

（Writer：Juliy）