Long-term Value Investment Strategy: The Path to Wealth Growth Across Cycles
1. Core Essence of the Strategy
The long-term holding strategy is based on the value investment concept of "time creating compound interest". By selecting high-quality assets and holding them for the long term (usually over 5 years), investors can share in the capital appreciation and dividend income brought about by the continuous growth of the company. This strategy is suitable for:
Investors seeking steady growth
Office workers who do not have time to monitor the market
Long-term fund management such as pensions
2. Key Implementation Elements
Stock Selection Criteria System:
√ Continuous ROE over 12% for 5 years
√ Gross profit margin higher than the industry average
√ Operating cash flow consistently positive
√ Dividend yield stable above 3%
Position Building Methodology:
Use the "pyramid" method for increasing positions
Increase allocation during market downturns
Control individual stock position to within 15%
Portfolio Construction Principles:
■ Industry Diversification (covering 3-5 unrelated industries)
■ Market Capitalization Balance (combination of large-cap and growth stocks)
■ Maintain 10-15% cash reserve
3. Dynamic Management Mechanism
Regular Review System:
Review financial metrics quarterly
Evaluate industry competitive landscape annually
Adjust the portfolio every two years
Selling Discipline:
◆ Continuous deterioration of fundamentals
◆ Severe valuation bubbles (PE > historical 90th percentile)
◆ Finding more cost-effective targets
Risk Hedging:
★ Use stock index futures to hedge systematic risks
★ Allocate to some defensive industries
★ Maintain a moderate bond position
4. Analysis of Strategy Advantages
Transaction Cost Advantages:
Significantly reduce trading frequency
Save on stamp duty and other fees
Reduce impact costs
Tax Advantages:
√ Long-term capital gains tax benefits
√ Differential taxation on dividend income
√ Avoid high tax rates from short-term trading
Compound Interest Effect:
◇ With an annualized return of 15% on 100,000 yuan, it can reach 1.63 million yuan after 20 years
◇ Compound growth from reinvested dividends
◇ The intrinsic value of the company is released over time
5. Essential Conditions for Success
Research Ability:
Understand financial statements
Analyze industry prospects
Evaluate management teams
Psychological Qualities:
× Do not operate emotionally due to market fluctuations
× Reject the temptation of short-term profits
× Maintain sufficient patience
Capital Planning:
Use idle funds that will not be touched for 3 years
Establish a phased investment plan
Reserve emergency funds