European Stocks Soar 5%, A-Shares Witness Miracle: Who's Buying?

At 4 PM, stock markets across Europe opened as scheduled and immediately experienced a stunning rise. So far, after two hours of trading, the gains in Germany and France have both exceeded 4%, with the German DAX index even reaching a peak increase of more than 5%. Since the German stock market began its downward trend at the beginning of this year, there has never been a day with such a high gain of 5%.

A similar trend is also observed in several other European countries. Considering the past two trading days, when European stock markets initially fell and then rose during the session, it seems that this round of stock market fluctuations caused by European conflicts has reached its end.

Although the U.S. stock market has not yet opened, current futures have shown an increase. The futures market for the NASDAQ index has performed particularly well, already up by 2%.

With overseas markets in a favorable state, will A-shares also improve? Does today's significant reversal indicate the start of an upward trend?

01, Stabilization Overseas?

In fact, signs of stabilization in overseas stock markets have already begun to emerge prior to this.

On Monday, although European stock markets opened with a significant drop, they ended slightly higher.

On Tuesday, European stock markets remained in the red, indicating an upward trend.

On Wednesday, the three major U.S. stock indices experienced a slight drop after opening, but the closing decline did not exceed 1%. There were noticeable increases during the session, with declines only occurring at the close.Of course, the plunge at the end of the U.S. stock market also affected the performance of stock markets in various Asian countries today. A-shares experienced a significant decline today, and by the time the A-share market closed at noon, many investors were considering whether they should cut their losses and leave the market.

Many fund investors have asked the same question almost simultaneously: How long will the market continue to fall, when will there be an opportunity to rise, and should they leave the market to wait and see for now?

In fact, market timing is not the most important factor.

02, Gold and Oil Prices Falling?

Corresponding to the stock market is the commodity market, especially in the performance of gold and oil, which is more evident.

In the past two weeks, both gold and oil have risen rapidly. Yesterday, the intraday price of gold rose to 2078 yuan, and today the price of gold has slightly increased. However, within the last hour, it has quickly plummeted, currently down by 1.25%. As gold begins to fall, the stock market starts to rise, and the seesaw effect appears once again.

The same performance can be seen in crude oil, which is currently close to a 2% drop. Moreover, for crude oil, there is one thing to pay attention to: on Monday, the price of crude oil once broke through 130 U.S. dollars, but it fell significantly at the close. Yesterday, crude oil tried to rise again, but it also fell back to some extent at the close. So far today, it has already shown a decline.

Over this period, the trend of the stock market and oil and gold has been inverse. The stock market has been continuously falling amidst fluctuations, while gold and oil have been continuously rising, all of which are due to factors from Europe.

Now that gold and oil are falling, it indicates that funds seeking safety are starting to flow out, including many funds that need to take profits. After these funds flow back into the stock market, they have driven a significant rise in European stock markets today.

So, does this mean that the stock market has stabilized now?Should we say, take advantage of the slight rebound to exit quickly to avoid a larger decline?

Perhaps my experience can help everyone understand why I don't think timing is very important.

03, Is Timing Really Important?

Looking back at the performance of the A-share market today, the performance this morning made everyone nervous. Fund investors unanimously asked whether they should redeem first and wait and see, all worried that the market will continue to decline rapidly and significantly in the future.

Everyone has different investment styles and different risk tolerances, so everyone's approach will definitely be different.

But for me, in nearly 20 years of fund investment career, a discipline formed is to only take profits and not cut losses.

I started buying funds in 2003, and it has been 19 years now. Looking back on the 19-year journey of fund investment, the average annual compound return rate is over 15%, but the main contribution to this return rate is not the choice of timing.

Many people believe that only by buying at a low position and selling at a high position can fund investment make money.

Now, many fund investors also hope that they can get out in time at the beginning of the decline, and then buy again when the rise starts, these are all attempts to time the market.

However, in my 20-year investment career, there are very few who can buy a large amount at a low position and escape at the top in time, maybe this is not within my ability range, but it does not affect me to obtain a relatively acceptable return rate.For instance, I began purchasing in 2003 and initiated a fixed investment plan in 2004, only to be met with the embarrassment of the market plummeting below 1,000 points in 2005. My initial foray into fund investments resulted in losses for over a year.

Take another example, the peak of 2007 occurred in October, but my fund profit-taking happened in March of that year. In other words, most funds missed out on the rapid rise that followed for the rest of the year.

A similar situation occurred in 2015, when I liquidated my funds in April, but the stock market continued to rise until mid-June, reaching 5,100 points.

Additionally, I have experienced prolonged periods of losses, from 2010 to 2014. During this time, the stock market performed poorly over the long term, with funds occasionally suffering losses and occasionally making profits. If one truly had the foresight to time the market, it would have been entirely possible to invest that money in real estate during that period.

Consider also the year 2018, which started at a high point in January and ended with a full-year decline, with the CSI 300 Index falling by more than 25%. Throughout that year, my funds neither reduced their positions at the beginning nor significantly increased them at the end. In other words, no additional actions were taken due to market timing; it was just regular fixed investment, yet this did not affect my average returns over the years.

I believe that good operational methods and sound investment discipline are more important than market timing.

04, What to do?

Now, standing at the point where the market has fallen to this level, the options available to fund investors are essentially threefold.

First, partially or fully redeem to avoid a more significant decline in the future.

If one were to actually do this, and the market continues to fall, one might feel fortunate to have avoided a greater loss. However, it does not guarantee that one's funds will be able to buy in at a lower position.Because when the market continues to decline, even if it's cheaper than the current selling price, you may not dare to buy. When the market begins to warm up and gradually rises, many people still hesitate to buy. Perhaps the next time you buy, it will be at a higher price than the current selling price, which is selling low and buying high.

In fact, many investors do just that.

Secondly, continuously increasing positions during the current decline could lead to better returns and easier recovery if the stock market rises afterward. However, there's also the possibility that the market continues to fall, and the investment losses grow larger.

Thirdly, this is the approach I am currently using: to stay put for now. But I plan to further increase my positions when the market's decline is smaller or more moderate in the future.

Everyone should have their own investment rules and not be too easily influenced by market sentiment. No one dares to determine that this is the market's lowest point, but most experienced investors can sense that we are currently in a relatively low position. While there may still be a 3%, 5%, or even 10% drop in the future, the chance of a 20% or 30% increase is greater.