A Question "Easy" Answer: Investment In Public Funds, How Long Can It Be Held Without Losing Money?

"Easy" answer: holding time increases, earning probability increases

We all hate losses, especially in a stable and good economic environment. It is a painful thing to buy funds and a thing that can be avoided with great probability.

So for investors who have bought active equity funds, how can they reduce or not lose money? Is there any simple and effective method?

Let's take a look at the history first.

From April 1, 2011 to March 31, 2021, the stock market has experienced several big ups and downs. We selected 315 active equity funds and partial stock hybrid funds which have been established for 10 years. We calculated the return rate of any one of the funds purchased on each trading day and held it for one month. The results show that 56.8% of the total samples are profitable (yield > 0), However, 43.2% of them lost money (yield < 0). Most of the investors who bought on February 10, 2021 and sold the above sample funds on March 10, 2021 are in the loss sample of 43.2%< p="">

Everyone has played the game of tossing coins. Theoretically, the probability of both the front and the back is 50%.

If the holding time is too short, buying funds to lose money or make money, it is similar to the probability of tossing coins, full of uncertainty.

If you buy and hold one month and three months, the probability of not losing money is only more than 50%.

For us who are averse to losses, this probability is too low.

Therefore, we further lengthen the holding period and calculate the returns of holding for 6 months, 9 months, 1 year, 2 years... And even 10 years.

According to the calculation results, we can draw the following curve: with the increase of holding time, the probability of making money increases（ The algorithm is described at the end of the paper.)

When the holding period increases to 3 years, the probability of no loss has increased to 80%; When holding for 5 years, the probability of no loss is more than 90%, and the probability of holding for more than 6 years is 96.3%, indicating that the possibility of loss is very small at this time. Insisting on long-term holding is the simplest way to avoid bearing actual losses.

(data source of this issue: e-fonda internet teaching base, wind, April 1, 2011 to March 31, 2021; The sample funds include the equity funds under wind secondary classification and partial stock hybrid funds established before April 1, 2011; Suppose 1 month = 20 trading days, 3 months = 60 trading days, 1 year = 240 trading days, and so on.)

Knowledge patch:

How to calculate the probability of positive return is illustrated by buying and holding for one year

There are 2432 trading days in these 10 years. You can buy and hold a fund for one year on the first day (assuming 240 trading days), or you can buy and hold it for 1 year on the second day... And so on. There are 2432-240 + 1 situations when you buy a fund and hold it for 1 year on any trading day. In each case, there are 2193 returns for one fund and 690795 returns for 315 funds, If 457889 of these returns are greater than 0, the probability of positive return = 457889 / 690795 = 66.3%.