How to Invest in the CSI All-Securities Company Index?

The code of the CSI All-Securities Company Index is 399975, with 50 constituent stocks. It almost includes all the major securities companies in the market, making it a top choice for investing in the securities industry among index funds.

According to data from Tiantian Fund, there are 31 funds in the market that track this index. The one with the largest scale is Southern Asset Management CSI All-Securities Company ETF Link C, with a current fund size of 4.551 billion yuan. (This is not an investment recommendation, just a description of the actual situation.)

We are all quite familiar with the main business of securities companies, which is to help clients buy and sell stocks and funds. Bank螺丝钉 (a well - known figure in the investment field) referred to the securities industry as the “King of Cycles” in his “Index Fund Investment Guide”, and described securities companies as “opportunists in the market”, which I think is a vivid metaphor.

The main source of profit for securities companies is the various handling fees and management fees during the stock and fund trading process. From this, we can see that this industry does not create real value in itself, so in my personal opinion, it does not have long - term growth value. However, its revenue fluctuates with the stock market, showing a certain cycle, which provides the possibility of making profits through investing in this industry.

Since the securities industry does not truly create value, it is not suitable for long - term holding. But if we can combine it with the cycle, buy when it’s relatively cheap and sell when it’s relatively expensive, we should be able to make a profit.

So the current question is how to buy when it’s cheap and sell when it’s expensive.

A possible workable method is regular investment combined with valuation.
Make regular investments and buy when the valuation is low, and start selling when the valuation is high. (This idea comes from Bank螺丝钉)

The most common valuation indicators are PB (Price - to - Book Ratio), PE (Price - to - Earnings Ratio) and ROE (Return on Equity). Tiantian Fund has a valuation function for common index funds, which includes these three indicators.

The following figure shows the valuation of the CSI All - Securities Company Index (399975).

As we can see, the current valuation of this index is relatively low. The curve in the screenshot is the trend of PB. In fact, the trends of PE and ROE are also very similar, basically all at around the 15% - 20% percentile.

Meng Yan’s team mentioned in Youzhiyouxing that the probability of making a profit over a 5 - year holding period is 83%, as shown in the following figure.

Considering that the market has been rather sluggish since the end of 2021 until now, which has lasted for more than two years, I privately interpret it as the probability of making a profit over the next three - year holding period is 83%, which makes it quite worthy of investment.

Of course, there is a major prerequisite for investing in index funds, that is, to believe that China’s overall national strength will continue to rise in the next few decades. I think this is not difficult to understand. If the country is in decline, how can its investment market be good?

I am very optimistic about the future of our country and believe that the government has the ability to make the country stronger and more prosperous.

So, about a month ago, I started making regular investments in Southern Asset Management CSI All - Securities Company ETF Link C, investing a certain amount of money every week, which is about 15% of my total amount.

I do not recommend anyone to invest in this fund. I’m just recording my own thoughts. When I decide to sell this fund in the future, I will probably write another blog for a review.