A-Share Plunge: Funds Shrink Rapidly, Is 3500 a Major Hurdle? What to Do?

The stock market began to decline as soon as it opened today, and by the time of closing, all major indices had fallen by 2% to 3%. The decline in funds was equally significant. Based on intraday valuations, some pharmaceutical funds even plummeted by 5% to 6%. Military industry funds fell, liquor funds fell, and funds for banking, securities, and insurance also fell. Suddenly, everyone had a feeling of déjà vu—could the round of declines that occurred after the Spring Festival be about to replay itself?

01, Earning Money Despite Ups and Downs Around 3500

In fact, the Shanghai Composite Index has been fluctuating around 3500 points for a year. As fund investors, we should have long been accustomed to this. Moreover, compared to stock investments, from July last year when the Shanghai Composite Index reached 3400 points to the current level of 3500 points, the average return of the funds we hold has reached 30%. It is not uncommon for better-performing funds to bring investors returns of 50% or even higher.

Given this, what is there to worry about?

When we buy funds, many of us understand that funds are certainly not stocks. Fund investment is a long-term investment, hoping to achieve corresponding returns through long-term investment.

Let's look at the long-term data together with "Caishuo Deming."

The so-called "long-term" refers to three years, six years, or even several decades.

02, Since the Bull Market of 2007

Looking at the data, there was a period of fluctuation around 3500 points when the market rose and then fell in 2007. Starting from the 3500 points at that time, 13 years have passed, and the market is again fluctuating around 3500 points. In these 13 years, it seems that the Shanghai Composite Index has come and gone from 3500 points and returned to 3500 points without much change.

Let's take a look at the changes in funds.Let's first take a look at the first time period. On April 11, 2008, the Shanghai Composite Index was exactly at 3,500 points. Now, as of early July 2021, the Shanghai Composite Index has returned to 3,500 points.

So, 13 years have passed, let's see how the funds that already existed at that time have performed up to now.

We found that the average return rate of these funds reached 185%, which means that if you bought a batch of funds in April 2008, and then the market continued to fall in 2008, it picked up in 2009 due to the 4 trillion stimulus, but after rising to over 3,000 points, it started to fall again in 2010 and continued to decline for quite a long time.

Then, after the bull market in 2015, the funds were not sold. Later, from the second half of 2015 to 2016, the market continued to fall, and then it fluctuated, but you held on until now.

After going through so many ups and downs, on average, your funds could achieve a return of 185%, turning one yuan into 2.85 yuan. And this is just the average return. You see, not bad, right?

In fact, some funds have achieved higher returns during this period. For example, there are 36 funds whose performance has exceeded 300%, and the highest-performing fund over these 13 years has achieved a return rate of 700%!

Many of these funds have been included in our 10x fund evaluation series, including Harvest Growth, Fullgoal Tianhe Steady, Jing Shun Great Wall Domestic Demand Growth, and Yinhua Wealth, whose returns have long exceeded ten times.

So, it turns out that even from 3,500 points to 3,500 points, we can still make money, and we can make quite a bit!

03, 15-year bull market

Let's look at the second time period.Let's take a look at a shorter period, starting from July 8th, 2015.

Before 2015, from 2014 to 2015, in just a short span of one year, our A-shares rapidly stretched due to leveraged financing, and that round was called the "leverage bull market." It reached its peak at 5178 in June. Then it began to decline, and by July 8th, it had already fallen from over 5100 points to 3500 yuan.

Consider that 3500 yuan then to the 3500 points now, nearly six years have passed, let's see what has happened during this period?

Firstly, there was a massive stock sell-off. Then came the 2016 circuit breaker, which was a rather grueling phase, followed by a slight increase in 2017, but this slight increase reached its peak in January 2018. Then, it continued to decline, with 2018 being a particularly harsh year for the market. 2019 and 2020 were characterized by a structural bull market. Thus, after six years of volatility, it essentially went from 3500 points back to 3500 points.

So, how were the fund returns during this period?

During this time, for example, the best-performing fund, Jing Shun Great Wall Emerging Growth, achieved a 400% return over these six years. In addition to this, there have been many fund managers over the years who have become quite familiar to everyone. Names like Zhang Kun, Hu Xinwei, or Liu Yan Chun, and so on. Therefore, as long as we find a good fund and a good fund manager, not necessarily the best fund, we can reap benefits from it.

Of course, the ranking of the aforementioned managers has suddenly fallen behind during this period, but their performance over the past six years is still there. If we look at it in the long term, perhaps the problem is not significant.

04, Short-term case

Let's look at a third case, again from 3500 points to 3500 points, but this time over a shorter period.

On January 22, 2018, the Shanghai Composite Index once again exceeded 3500 points, but then it began to decline. The decline for the entire year of 2018 reached over 25%, with some funds experiencing even greater losses, with an average decline of 25%.In this round of decline, many people decided to quit playing in the second half or at the end of 2018, choosing to leave the market and admit their losses. Little did they know they were falling just before the darkest dawn. After that, from 2019 to 2020, and even up to now, a structural bull market emerged.

Major indices, especially the Shanghai Composite Index, did not see a significant increase, essentially falling from 3500 and then returning to 3500, forming a very beautiful smile curve.

If one had invested in a fund in a lump sum in January 2018 and held it until now, the fund with the highest return to date is Qu Yang's Qianhai Open Source China Rare Assets, reaching 320%.

Following that are a large number of medical funds, such as Fu Guo Precision Healthcare, which was previously managed by Yu Yang and performed very well, but he has now left the position.

There are also funds like Bank of Communications' Pharmaceutical Innovation, ICBC Credit Suisse's Frontier Healthcare, Guangfa Healthcare, and Zhong Ou Healthcare. Over the past three years, a significant feature has been that medical funds easily take the lead, as these three years include the COVID-19 pandemic from 2020 to the present.

05, Learn to Take Profits

We have looked at the period from January 2018 to now, which is a little over three years, and we have also looked at the nearly six years from July 2015 to now, and even a longer period from 2008 to now, which is 13 years. All of these periods involve fluctuations around the 3500 mark and then returning to 3500. However, even without regular investment, funds can still make money.

Therefore, I want to emphasize that it is crucial to pay attention to long-term investment in funds.

Finally, let me add a few points. Why do we see that the return rate over the longest period from 2008 to now is not high?

The average return rate is 185%, and the best performance is around 700%.We can see that the best performers in the past three years have already reached 300%. If we look at the best performers over the past six years, they have achieved 400%.

Why is it that the longer the time frame, the lower the annualized rate of return?

There is a problem here. Because our stock market fluctuates back and forth. So, if you just hold on without doing anything, you will eventually make money, but the returns are not as good as taking profits at the right time.

Another important point is that if you want higher returns, you must use regular investment. Because from 2008 to now, you can complete several rounds of regular investment with a smiling curve. Caishuode Mingbai once doubled in the round of regular investment from 2008 to 2015, and then doubled again from 2016 to July 2020. Think about it, this period has already accommodated two rounds of regular investment that doubled. And the average rate of return reached more than 18% and 25% respectively.