Investing Strategies Amid Falling Interest Rates

After several rounds of cuts in deposit interest rates,the deposit interest rates in our country have officially entered the "1% era".

Taking a state-owned major bank as an example,the annual interest rate for five-year fixed deposits has been adjusted down to 1.80%,and most joint-stock banks have adjusted down to 1.85%; the 10-year government bond rate has broken through the downward 2.5%,currently at 2.23%,and the corresponding various financial data have also shown a downward trend.

At the same time,the investment in equity assets is also not satisfactory.

Although various data prove that the longer the holding period of funds,the higher the probability of making money,many people may still have floating losses after holding funds for two or three years.

These are the puzzles for every investor,how to make more suitable conservative investments for the present?

To cope with the downward trend of yield,the asset allocation adjustments made by overseas residents and financial institutions may bring some inspiration to everyone.

From 2008 to 2017,the United States experienced a relatively long-term low-interest-rate environment.

As the risks in the real estate and financial markets continued to ferment,the Federal Reserve started to cut interest rates continuously from September 2007.

By the end of 2008,the short-term interest rate fell from 5% in September 2007 to around 0%,and the 10-year U.S.Treasury bond rate also fell nearly 250BP to around 2.1%.

Although there was a short-term economic recovery from 2009 to 2010,it was not until December 2015 that the short-term interest rate began to rise gradually.

During this period,the proportion of financial assets held by U.S.residents showed a long-term upward trend,increasing from 63.8% in 2007 to about 70% at the end of the low-interest-rate cycle.

In the rapid interest rate decline phase,the monetary deposits held by residents often rise rapidly,but in the second phase of the interest rate decline cycle,the proportion of stocks and mutual funds held by U.S.residents began to rise.

Residents and non-profit institutions significantly increased their equity investments and mutual funds,and the proportion of stock funds in residents' portfolios quickly increased from 31.5% in 2009 to 42% at the end of the low-interest-rate cycle in 2015.

In the early 1990s,the Japanese stock market and real estate market bubbles burst one after another.

In order to get rid of the crisis,the Bank of Japan turned to a loose monetary policy,continuously cutting policy interest rates nine times from 1991 to 1995,and the 10-year government bond rate fell from 6.7% to 2.9%.

After 1995,the 10-year government bond rate remained below 2%,and the overall interest rate environment entered a low fluctuation period.

In the long-term zero interest rate or even negative interest rate environment,bond assets are difficult to meet investors' pursuit of yield,and the overall asset allocation of Japanese residents shows the characteristics of "abandoning bonds and buying stocks".

Financial institutions and pension funds have increased their allocation of overseas equity assets.

Looking at overseas experience,if a "low interest rate" environment appears,then the asset allocation of that country is more likely to be inclined to equity assets.

At present,the A-share market is volatile,"the most dim before victory,the darkest before dawn".

After a long-term downward trend,the entire equity asset is at a low stage,just like every market bottom,it is very difficult to endure.

If there is a floating loss in the fund account at this time,or if you don't know how to layout equity assets,it is recommended to continuously reduce the holding cost through a continuous fixed investment,collect more chips in the bottom interval,and once the market improves in the future,it can increase the probability of returning to the original and making a profit.

Even if you buy a product that has performed poorly in the past two or three years,as long as this product has an upward potential in the long term,fixed investment is one of the best ways to participate.

Since the beginning of 2024,the dividend index has performed well,and wind data shows that the coal sector with the highest dividend rate in the Shenwan first-level industry has also performed relatively well.

Behind the downward interest rate is the weak economic momentum,and the low stock market sentiment and risk preference lead to more funds preferring sectors with defensive characteristics.

Therefore,the high dividend strategy that emphasizes cash flow,profitability stability,and shareholder return may be more suitable for the current market.

So,the first point,standing at the current point,the overall market valuation is at a low level,participating in the market through a fixed investment to resist the risk brought by the downward market interest rate,or a better solution.

The second point,actively embracing diversified asset allocation,the market style of the past two years has fully explained that uncertainty is the norm of investment.

The bond market was hot in 2023,the dividend assets were popular in the first half of 2024,and the gold assets continued to strengthen,all of which fully illustrate that it is impossible to make predictive investment.

If you bet on a certain type of asset,it is likely to increase the volatility of investment.

Do a good job of asset allocation,according to discipline to carry out asset rebalancing,simplify investment,is a better investment choice.

There are many concepts of asset allocation,such as risk balance strategy,barbell strategy,40/60 stock bond ratio,etc.,all are classic investment frameworks that have passed through time.

No matter which strategy you choose,the most important thing is to have a good understanding of yourself.

Different family income,different investment goals,different risk tolerance,will bring different decision-making behaviors.

Use the "weak thinking" to lower life expectations and make investment that suits yourself.

1.

Set clear financial goals: short-term goals (such as savings plans within a year,emergency funds).

Medium-term goals (such as buying a house,buying a car,children's education).

Long-term goals (such as retirement planning,wealth inheritance).

2.

Understand personal financial situation: compile a family budget,record income and expenditure.

Analyze the debt situation,including credit cards,mortgages,car loans,etc.,and consider formulating a repayment plan.

Evaluate existing assets,including cash,deposits,investments,real estate,etc.

3.

Establish an emergency fund: it is generally recommended to reserve at least three months of living expenses as an emergency fund to deal with emergencies.

You can choose to store the emergency fund in liquid products such as demand deposits and money market funds.

4.

Formulate an investment plan: choose the right investment products according to risk tolerance,investment period,and financial goals.

Diversify investments,diversify risks,and consider various investment methods such as stocks,bonds,funds,bank financial management,gold,foreign exchange,etc.

Regularly review and adjust the investment portfolio,and make corresponding adjustments according to market changes and personal situations.

5.

Control consumption and debt: avoid unnecessary consumption,learn to shop rationally.

Minimize high-interest debt,such as credit card overdrafts,etc.

If there is a loan,ensure that the loan interest rate is reasonable and repay on time.

6.

Improve income and savings: seek opportunities to improve professional skills and education to increase income.

Develop the habit of saving,and deposit a certain proportion of income as savings every month.

Consider using side businesses or investments to increase income sources.

7.

Pay attention to tax planning: understand personal income tax policies.

Use tax preferential policies for investment planning.

8.

Keep financial knowledge updated: pay attention to economic dynamics,financial market changes,and investment product information.

Participate in financial knowledge training or read relevant books to continuously improve your financial management ability.

9.

Formulate an insurance plan: configure appropriate insurance for yourself and your family,such as accident insurance,medical insurance,critical illness insurance,life insurance,etc.

Ensure that the insurance coverage and amount can meet the needs of the family.

10.

Be patient and disciplined: financial management is a long-term process that requires patience and persistence.

Avoid blindly following the trend or impulsive investment,and maintain calm and rational judgment.

Through the above steps and suggestions,individuals can more effectively manage their own financial resources and achieve financial freedom and life goals.

In addition,do a good job of asset allocation of the base warehouse part,in the interest rate down environment,if the deposit cannot meet the investment needs,you can pay attention to bond assets.

What is diversified investment?

For example,you can divide assets into three parts: defensive assets,stable assets,and offensive assets.

Then diversify investments.

What are these three types of assets?

Defensive assets: cash,fixed deposits,money market funds,government bonds,health insurance,life insurance,etc.

This money is used to bottom out and does not need to pursue returns excessively.

Stable assets: leading dividend stocks,bond funds,dividend index ETF funds,dividend insurance,etc.

Their characteristic is that the balance between risk and return is good,and they can beat inflation.

For safety,the total proportion of defensive assets and stable assets in total assets should not be less than 60%.

Offensive assets: stocks,equity funds,gold,foreign exchange,etc.

Their returns are high,and the risks are also large,requiring a certain tolerance.

Among them,gold is relatively special.

In terms of financial attributes,its volatility is very large with market sentiment and capital fluctuations,and you need to be careful about operational risks; but for geopolitical uncertainty,gold is a safe asset.

Antiques in prosperous times,gold in troubled times.

Let's analyze a classic case,which is the distribution of Warren Buffett's holdings.

You can directly copy homework according to this distribution: Buffett's assets are roughly divided into three categories: the first is the operating cash flow assets,which are mainly the listed companies that Buffett has acquired and fully controlled,such as insurance,railways,energy companies,etc.

These companies are all cash cows,continuously contributing cash dividends to Buffett.

This type of asset accounts for about 39.1% of the total holdings,and these companies bring about $4.33 billion in operating profits to Buffett every year.

Berkshire Hathaway's market value and net assets are about $1 trillion,that is,$39.1 billion of assets can generate $4.33 billion in profits every year,with a return rate of 11%,and all are cash dividends.

Isn't it fragrant.

Such a high return rate and stable cash flow is Buffett's biggest confidence in investment.

The second type of asset is cash plus U.S.Treasury bonds,accounting for about 29.2% of the total,with a scale of about $29.2 billion.

Among them,there are about $4.3 billion in cash,which can be used to bottom out at any time,and about $28 billion has bought U.S.Treasury bonds,enjoying a 4%-5% interest rate while also seizing the bond appreciation brought by the Fed's interest rate cuts.If there are significant opportunities in the stock market,Warren Buffett can also sell bonds to invest in stocks.

He can attack and defend.

The third category of assets is equity assets,such as Apple,the five major trading companies,American Express,Coca-Cola,etc.,which account for 31.7% of the assets.

That is to say,Buffett only used less than one-third of the money to invest in stocks.

Buffett's asset allocation plan is a perfect balanced configuration.

When there is no market trend,use dividend assets to earn a stable cash flow,and use bonds and cash as a safety cushion; when the market rises,equity assets can earn appreciation profits; when the market falls,cash can be used,and even bonds can be sold to bottom fish.

Even if the bullets are used up,the dividend assets,this cash "big cow",will continue to provide new "bullets".

This strategy hedges risks when conservative and strengthens returns when attacking,ensuring a stable profit.

Buffett has turned stock investment into a pyramid supported by three points,which is worth our learning and reference.

Moreover,in addition to stocks,there are bonds,gold,insurance,etc.

in the major asset allocation.

After reasonable asset allocation,it is equivalent to having a "basket" of assets to fight,and the sources of income of the investment portfolio are not limited to a single asset category,which can achieve the effect of "if the east is not bright,the west is bright".

For example,when equity assets fall,bonds or gold in the investment portfolio may perform well,thereby reducing the overall volatility and drawdown.

Howard Marks once said,"All great investments start in an unsettling environment."

When others are unwilling to buy,the best time to buy may follow; on the contrary,when everyone is scrambling to buy,the security prices are often overestimated.

In the interest rate decline cycle,individuals can make their own financial planning according to their position in the life cycle.

Combined with the current situation,go with the trend,and appropriately increase the allocation of equity assets by fixed investment to obtain excess returns.