YouTube 01/24/2020 Question Comment

[YouTube 01/24/2020 Question Message] CLEC Investment and Financial Management Education Channel Blog Post Date: February 08, 2020

Here are a few questions for you to ask:

1. Under the quantitative easing policy, what are the conditions for judging market bubbles?

2. Can the index buying and long-term holding strategy be applied to countries other than the United States, such as Taiwan, which has a shallow dish market?

3. Under the quantitative easing policy, in terms of safety, is it a good choice to convert bonds into fixed deposits?

4. Regarding the impact of Wuhan pneumonia on China and Hong Kong, I personally believe that there will be a period of correction. May I ask about the investment strategy and judgment basis for taking on dips?

Your question is a good one. My thoughts are as follows:

1. Under the quantitative easing policy, what are the conditions for judging market bubbles?

First, assets will rise to unreasonable levels. In other words, we cannot calculate its investment value using PEG. For example, MSFT's EPS is $5.3 with a yoy growth rate of 20%. After more than three years, the EPS will be $9.1. Based on the current stock price of $165 (01/24/2020), it is reasonable to calculate PE 18. But if the current MSFT stock price is $600, then the PE in three years will be 65, which will be very unreasonable. At this time, we reasonably judge that the market is expensive and the bubble is big! So we can first look at the future stock market rise. If the three-year PEG is higher than 30, we should pay attention to market bubbles!

2. Can the index buying and long-term holding strategy be applied to countries other than the United States, such as Taiwan, which has a shallow dish market?

In a normal country, if there are no problems with its system and industry, it will still grow in the long run. It is just a question of the long-term growth rate.

Choosing a national index is the same as choosing individual stocks. You must have a relative understanding of the country's industrial prospects, the country's industrial growth rate and the long-term stock return rate.

If the long-term index investment return rate in the United States is 10%, the index return rate in Taiwan is 7%. Just looking at long-term returns, of course you should invest in U.S. index funds. Moreover, U.S. high-tech funds have higher long-term profits.

Therefore, purely considering the return on investment, it is relatively good to choose American high-tech funds and index funds. Taiwanese investors bought "Franklin High-Tech Fund" and "Franklin Growth Fund"

3. Under the quantitative easing policy, in terms of safety, is it a good choice to convert bonds into fixed deposits?

Long-term bonds are greatly affected by interest rates and fluctuate greatly. Generally, I do not recommend buying long-term bonds. Buying short-term bonds of two or three months is actually the same as time deposits or monetary funds.

In the absence of bubbles, don't worry too much about loose money, but invest most of your assets in U.S. index funds.

General investors and those with working incomes need to set aside one year's living expenses. Those who are retired and have no job may need to set aside two to three years' living expenses.

4. Regarding the impact of Wuhan pneumonia on China and Hong Kong, I personally believe that there will be a period of correction. May I ask about the investment strategy and judgment basis for taking on dips?

Usually most of my money is fully invested, leaving only two to three years of living expenses. If the market really drops, I may reduce the living expenses reserve a little bit, and I will exchange a small part (2%) of the index into a good stock that has fallen deeply.As for how much the market will fall before buying, there is really no way of knowing. The index usually falls by 5%-10%, which is a good entry point. If it can fall by 15% to 20%, you can buy more. The buying of individual stocks is not certain. If a stock can fall by more than 15%, it should be the beginning of a good buying point.

I don’t know if the above reply is clear. If you still have any questions, please ask for discussion!

Thanks