Chapter 55 3. Diversified investment strategy

●There is so-called hedging between these investment industries. What is hedging?It means that in two industries, I am good and you are bad, and I am bad and you are good, which can just offset them. ●Although this kind of investment is very conservative and it is difficult to maximize profits, it is not for profit maximization, but for risk minimization. Li Ka-shing's Hutchison Huangpu has seven core businesses, including ports, real estate and hotels, retail, energy, telecommunications, infrastructure, financial investment, and more.But these investments are not simple diversified investments. Many enterprises in our mainland are also making diversified investments.As a result, it all failed.Why can't many mainland companies do diversified investment, but he can?I think not only he can, but also the "Four Heavenly Kings" are similar.Because there is so-called hedging (also called complementarity) between the industries he invested in just mentioned, what is hedging (complementary)?That is, two industries, I am good and you are bad, and I am bad and you are good, which can just be offset, that is, the cash flows of these two industries can be hedged (complementary).

So, when the first industry is good, the second industry is bad.When the first industry is bad, the second industry had better be good.The good and the bad can just offset each other, so that the final cash flow can reach a stable state. I think this is his highest strategic guideline, and many entrepreneurs in the mainland are not at this level. How should we do it?We did not make hedging investments, but this is the situation: the first industry we invested in may be the same as Li Ka-shing, and the second industry we invested in was out of interest, which may be related households or investment based on imagination of.Therefore, the profit trend of the second industry is similar to that of the first industry, so there will be a situation that if it is good, it will be good, if it is bad, it will be bad, and when it encounters bad, it will go bankrupt together.However, Li Ka-shing's enterprises are different. When there are bad times, there are good ones, and when there are good ones, there are bad ones, which can offset each other.So I used its data to do an analysis, and I found that through this kind of hedging between industries, the risk of cash flow fluctuations has been reduced by 10 times.

Although this investment is very conservative.It is also difficult to maximize profits, but I want to tell readers a new way of thinking that the purpose of business operations is not to maximize profits, but to minimize risks.Moreover, he is not alone in making this kind of hedging and complementary investment. The reason why the "Four Heavenly Kings" became the "Four Heavenly Kings" is that their investment thinking is very similar, and each of them makes this kind of hedging investment.And according to my data, they have reduced the risk of cash flow fluctuations by at least 7 times and up to 12 times through hedging investments.Moreover, each of the "Four Heavenly Kings" has stored a large amount of cash. In the past 30 years, the ratio of cash to total assets of the "Four Heavenly Kings" has reached as high as 5%-15%. Only about 20%, their risk management styles are relatively close.