Research On The Effectiveness Of Defensive Portfolio Strategy Of Individual Investors

Stocks are the most long-term investment returns of large categories of assets.However,individual investors in China's stock market often suffer losses,mainly due to the lack of effective investment strategies.Defensive portfolio strategy is a securities market investment strategy designed for defensive investors,and defensive investors are investors who are concerned about the security of the principal and do not spend too much time and energy.It designs a defensive type suitable for China's securities market by studying the relevant literatures on portfolio theory and portfolio evaluation indicators at home and abroad,referring to the defensive portfolio strategy applicable to the US securities market,and combining the reality of China's capital market.The strategic investment philosophy is based on the idea of margin of safety.The strategic investment target is the securities investment target selected from the stock and anti-inflation assets according to the screening criteria.The execution rule of the strategy is to distribute the total investment funds evenly to the stock portion and the anti-inflation assets in the portfolio,wherein the stock portion of the funds is evenly distributed to each different stock,and these stocks are screened by stock selection criteria.Out,buy and hold;the funds in the anti-inflation assets are bought into the on-market monetary fund.When the portfolio adjustment time comes,the eligible stocks are re-filtered according to the stock screening criteria,and the funds are re-allocated according to the above rules.The applicable population of the strategy is a defensive investor,and the characteristics of the defensive investor determine the characteristics of the defensive portfolio strategy.In order to avoid the single frequency and time point selection,the strategy selects special data in the backtesting process,which causes accidentality in the backtesting results.It sets four comparison strategies.After the defensive portfolio strategy design is completed,the data is used for backtesting and testing.From May 2014 to the end of 2018 as the backtesting interval,the historical data of the stocks of listed companies in the Shanghai and Shenzhen stock markets from 2004 to 2018 are used to backtest the four comparison strategies.The back-test results show that at the end of the bull market in China's stock market at the end of 2014 and the bull market in the first half of 2015,the yields of the four strategies all lag behind the benchmark.From the second half of 2015 to the beginning of 2016,the market environment changed drastically,the stock market began to plummet,and large-scale stock market crashes occurred.In the face of the impact of systemic risks,the four strategies can effectively control the risks,and did not follow the market to fall,but instead obtained positive returns during the market slump,showing very good defensiveness.In the next market volatility phase,the yields of the four strategies are still able to maintain a steady upward trend of low volatility.Throughout the backtesting interval,the four strategies obtained an excess return ranging from 33.26% to 80.76%,respectively,and the performance evaluation indicators were better than the benchmarks,thus demonstrating the defensive portfolio strategy in the Chinese securities market is effective.At the same time,through the research,it brings some suggestions on investment to the individual investors in the Chinese securities market.First,the margin of safety theory is a mature investment idea that has been continuously tested in foreign developed securities markets for decades.Investors should keep in mind the idea of margin of safety when investing,and pay more attention to the difference between the intrinsic value and the market price of investment objects.Second,When investing in stocks,investors should screen stocks according to scientific and reasonable screening criteria.Before that,they should fully understand the important information behind the company's stocks.Third,investors who lack investment experience and expertise should position themselves as defensive investors,pay attention to the security of investment principals and reduce the return on investment expectations.Fourth,defensive investors must strictly implement defensive portfolios.Regardless of the external market environment or the holdings of stocks,investors must follow the established rules of the strategy to conduct investment activities.