“If you don’t have the knowledge, don’t know the company’s management team, or what field you’re operating in, you shouldn’t invest in securities by yourself”

Since the end of 2020, the stock market has shown signs of entering a new growth phase. And also from this point, new investors participating in securities trading continuously increased. For the whole year of 2021, domestic investors opened more than 1.5 million new securities accounts, one and a half times larger than the total number of new accounts opened in the previous four years combined. Meanwhile, the VN-Index also increased by 35.4% compared to the end of 2020. However, entering 2022, after the sideways sessions, only in the past 2 months, the market suddenly turned to decrease rapidly and deeply. VN-Index lost more than 20%, causing many investors to suffer heavy losses.

Talking on Talk show Finance Street (The Finance Street) on VTV8, Ms. Nguyen Thi Hang Nga, CFA, Deputy General Director of Vietcombank Fund Management Program (VCBF) shared risk management strategies in the context of volatile markets. motion.

Editor-in-Chief Mui Khanh Ly: Many new investors in the market have witnessed for the first time the market decline as quickly and strongly as in the past period, at this time the story of risk management for the portfolio is more interested, according to Ms. so what?

Ms. Nguyen Thi Hang Nga: First of all, we must understand what risk is, risk is defined as the probability that we will not achieve the expected return. However, for individual investors, people are most concerned with risk when they lose. When the market is going up, people can temporarily put aside that worry because buying the stock will increase. However, we must understand that the stock market always has ups and downs. Therefore, when investing, people must always think in two ways to gain profits when the market is up, but also to control risks when the market has fluctuations.

In the last few sessions, the market has had some signs of recovery and if the market goes up, will the risk be gone for investors?

In fact, I think any investment should be concerned with risk management. Stocks in particular are considered a high-risk asset class. And high risk here is defined that it can be very volatile, it can have a very strong up and it can also go down very quickly. When investing, at any time, you must be aware that such is the nature of the stock market.

In addition, shares are certificates that you own shares of the company, you are the owner of that company and the profit you receive will depend on the business results of the company. At the same time, if it is brought to the market for trading, it depends on supply and demand, on investor sentiment. This mentality depends on many factors and it can come from any time. For example, the Covid 19 pandemic, the war between Russia and Ukraine…

So, if you invest in the stock market now and expect it to be risk-free, that’s completely impossible. Even well-developed stock markets like the US have fluctuated wildly, down 13% so far this year, and before that it also increased during the post-Covid epidemic.

Not everyone knows about portfolio risk management. The fact that people invest in securities has increased, which is a good sign, but in return, investor sentiment is also easily affected when the market fluctuates, what is your opinion on this issue?

Firstly, people’s more participation in the stock market is also an inevitable trend that has happened in many countries. When people invest in stocks, they will benefit in two ways.

The first is beneficial to the people themselves, because in the long run, stocks themselves are the assets that can bring the highest returns in the long run for investors. In addition, the stock market is an extremely important capital channel of the economy. When people participate more in the stock market, it is clear that businesses will be able to raise capital and for economic development.

However, the fact that people participate but invest themselves, people think that investing in stocks is very simple, but in reality, it is not. Because individual investors tend to only get involved when the market has been going up for a while and see everyone around them profitable that they start participating and expect it to continue. In fact, the nature of investment when to make a profit you will have to buy low, sell high, ie buy cheap, sell high. But here investors will be bought high and think they can sell higher. Therefore, the risk is not when the market is falling, but the potential risk is when you have to buy at a high price.

When the market drops sharply people start to feel the loss and they will stop loss – stop loss. But in the case of stop loss in stocks with real value, investors are sold at the bottom. That is, individual investors, they will fall into such a spiral, will buy high, sell low and be psychologically affected.

I remember that in the first quarter of this year, for example, individual investors participating in the Vietnamese stock market accounted for about 85% of the market’s transaction value, so it would greatly affect the market’s fluctuations. . In more developed countries, they may also invest at first. For example, in the US in the 1990s, about 80% of individual investors invested themselves, but by 2020, only about 60% will invest by themselves, and 40% will invest for into funds.

So in your opinion, how should investors manage investment risk effectively?

If an individual investor has no knowledge of financial investment, has never seen a company’s financial statements, does not know who the company’s management team is, what field the company operates in, then Best not to invest on your own. Because if you invest by yourself based on the information in the market or based on the advice of certain groups, it will be very risky. For such amateur investors, it is best to invest through professional organizations.

And if you still want to invest in stocks yourself, I think the most important thing is that you manage your risk. For example, at VCBF to manage risk we will have three ways.

The first is that stock selection must be very carefully evaluated on all aspects of the company and most importantly, must include the valuation model and run different scenarios, to compare the growth potential against the risk. There is a risk of loss, after knowing the value of the business, it will take advantage of market fluctuations to invest.

The second way is to build a very diversified portfolio, we choose the leading stocks in the industry but will be in many different industries and when a certain factor can affect this business, there will be other stocks. beneficial to another enterprise in the portfolio and as such the effect can be mitigated.

We are always in the mindset that there will be factors we cannot anticipate so we will always build a diversified portfolio to minimize risk.

And the third method is long-term investment orientation, the most important thing is that investors have to be patient. We are very limited to short-term trading. For example, in 2021, the leading equity fund VCBF has a portfolio turnover rate of only 29%, which means the average holding period of stocks is about 3.5 years.

With such investment methods, we have minimized a lot of risks when the market fluctuates strongly. Within 4 months of 2022 when the market dropped 9%, the two leading stock funds VCBF and growth investment fund VCBF still increased slightly. Or by the end of May 18, the market fluctuated a lot, the VN-Index decreased by about 19%, but both funds only decreased by about 6%, which is lower than the floor price of a single stock. votes in one session.

According to Marble