Low risk trading strategies for stocks II

Stock picking

Posted by GRY on October 29, 2018

HOW

The investment strategy of buying and selling stocks with low risk is described in this paper. The basis of stock selection is very simple:

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1. Is cash dividends stable?
  • I.If the stock corresponds to the listed company, it can maintain annual dividend, and still insist on distributing cash in the downturn of the industry, then it is necessary to analyze the cash dividend rate of the current price.

  • II.Like a year dividends, a year does not pay dividends, do not propose to buy.

2. Is the cash dividend rate above 4% at current share prices?
  • I.The dividend is stable and the cash dividend rate corresponding to the current price is more than 4%. Next, it is necessary to analyze the year-on-year growth of the revenue and net profit of the listed company.

  • II.Cash dividend rate is not more than 4%, not recommended for purchase.

3. Is revenue and net profit increasing or decreasing year on year?
  • I.If the revenue and net profits were to increase, and it was based on the fact that the stock dividends were stable and the cash dividend was over 4%, it would be bought and sold, of course;

  • II.If revenue or net profit decreases or increases less than a year ago, you can consider purchasing if you have enough cash.

  • III.If the year-on-year drop in revenue or net profit is too large, the industry may be in trouble and is not recommended to buy.

Note that stocks in the same industry are recommended to hold only one.

BUY

Well, the first purchase price of a stock, except for the fact that it has to be satisfied with a cash dividend of 4% plus, you need to look at the history price curve of the stock, and it’s suggested that you choose to buy it in the middle, not at the highest price.

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After the first purchase price is confirmed, the purchase price and the number of shares need to be recorded. You can use Excel to record the purchase price, and then you can make short-term band operation based on the price.

Whether to continue buying a stock depends on 3 factors:

1. Is there any cash left to buy stocks?
  • I.If there is no cash, it is suggested to sell part of the rising stock;

  • II.If even the rising stocks do not, the proposal to wait, either waiting for other stocks to rise, or personal income earned cash;

  • III.If can financing to buy, the proposal only buys the price corresponding to the cash dividend rate above 7% stock, other circumstances do not use financing position.

2. Is the cash dividend rate still above 4% at the current price?
  • If current price corresponding to the cash dividend rate remains above 4%, or even increased, you can consider to increase the purchase.

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Since our purchase price level corresponds to a cash dividend rate above 4%, if the cash dividend rate drops below 4%, there are generally two reasons:

  • I.One reason is that the share price has risen a lot compared with the previous buying, when it is recommended to liquidate positions;

  • II.Another reason is that the decrease of the company’s net profit leads to the decrease of cash dividend rate. At this time, it is necessary to analyze the company and decide whether to increase the stock according to the situation.

3. The extent of the decline in the minimum purchase price of unsold goods?
  • I.To judge the decline, you need to use Excel to record every stock purchase data;

  • II.The price of a newly purchased stock is at least 1% lower than the minimum purchase price.

  • III.Of course, it could be a 2 percent drop, or a 10 percent drop, depending on your decision.

SELL

1. Is the stock now trading more than 1 percent above its purchase price?

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  • I.You can sell as long as you’re up more than 1%;
  • II.Note that if the transaction fee is less than 5 yuan, the broker will charge 5 yuan. If the purchase fee is 100 yuan, the round-trip transaction fee will be at least 10 yuan. At this time, the increase will be 1%.
2. Is the cash dividend rate lower than 4% at current prices?
  • I.If cash dividends are between 3% and 4% and are higher relative to the purchase price, consider selling.

  • II.If the cash dividend rate is less than 2%, non-corporate dividends will be greatly reduced, generally doubling the stock price.

3. Whether the proportion of own cash is less than 30%?
  • I.If it is below 30 per cent, it must sell the shares that have risen and increase its own cash position to about 50 per cent.

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Low risk investment strategy of buying and selling stocks, must keep cash and stock proportion in the ratio of 1:1.

That is to say the amount of cash is basically equal to the amount of money invested in stocks.

That way, when the market goes wrong, we have the cash to buy the stock we want, and the rest is to wait for the upside to sell.