The weird investment preference of Taiwanese
Most investors in Taiwan generally believe that “deposit stocks” should be value stocks and exclude high-volatility growth stocks; I think it is mainly related to the investment habits of Taiwanese investors. How to say? Taiwanese investors have the following three extremely special preferences, all of which are fatal (compared to other countries, these three are almost the unique investment habits of Taiwanese investors):
- Any investment product must have a fixed coupon.
- Any investment product must be able to repay the capital.
- Investment in the stock market is only valued by the P/E ratio. You are welcome to refer to my other blog post on “U.S. stocks and Taiwan stocks investors’ valuation methods are completely different“.
Taiwanese are generally unmoved by the warnings that inflation will eat up your deposits and principal, based on the global trend of low or negative interest rates, the basic principles of economics. Any currency-based financial management method that is not recommended abroad is a basic equipment in Taiwan. As long as any investing product that cannot generate a fixed dividend, it will basically not be sold in Taiwan.
You only need to think about why Taiwan is the country with the most proliferation of whole life insurance in the world. The whole life insurance designed specifically for Taiwan is actually an annuity, and it has completely lost the meaning of insurance. For a dozen years straight, insurance premiums have amounted to 17.48 percent of Taiwan’s GDP, the highest ratio in the world.
Short-sighted but fatal investment method
Because of this habit, most investors in Taiwan are only willing to choose groups with low stock price fluctuations when depositing shares. To put it bluntly, bank stocks, telecommunications stocks, people’s livelihood products, and food stocks are very safe and high dividend-paying blue chip stocks (most of them are also called value stocks); this is the investment target of most pension funds or retirement groups in the US stock markets.
In fact, the growth of these stocks is very low, and many even lag behind the market performance, that is, the stock price will hardly rise. Investing in these stocks is not bad, but it wastes the biggest advantage of stock investment in all common asset classes-the long-term return rate will definitely exceed other common asset classes (such as gold, real estate, bonds, currency funds).
Deposited shares and long-term growth stocks investment” are different
Going back to the subject of this article; the same thing between the two (“deposited stocks” and “long-term investment growth stocks”) is that they encourage long-term investment. Both of these investment mentalities are correct. The differences between the two are:
- The term “deposited shares” used by Taiwanese is relatively conservative; they tend to have stable stock prices and dividends, which are value stocks in the eyes of most people; these stocks often underperform the market, which means that your principal may be possible in the long run will shrink, even if there is a dividend, it will not be able to make up for it. Depositors only want dividends. Investors should face up to the fact that dividends can’t make much money. Don’t lose big because of small gain on dividends and ignore the growth of stock prices. This investment method can be fatal when used in US stocks.
- The idea of super growth stocks is to lock in industries that investors are more familiar with, focusing on long-term competitiveness, market potential, and profitability; after buying, they will not move to enjoy the long-term compound interest of excellent companies and stocks. Growth stocks in the U.S. stock market, especially the technology industry, basically do not pay dividends, and such investors do not expect dividends.
Reasons to favor growth stocks
The reasons why I particularly like growth stocks are as follows:
- The value of an enterprise is directly proportional to its future growth prospects.
- Inflation will eat up fixed income assets: dividends, cash, bonds; and your salary income.
- Investing in growth stocks can enjoy the benefits of long-term compound interest as the company’s business grows.
- Only two or three outstanding growth stocks needed in your lifetime, and investors will be very wealthy.
- Investors in US stocks view the performance of listed companies in a fundamentally different way from Taiwan stocks: they favor high-revenue growth companies.
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