Group 1 - Funds are suitable investment products for ordinary people [2] - The article suggests that new investors should consider what type of funds are most appropriate for them [2] - It emphasizes the importance of psychological preparation before long-term investments [2] Group 2 - The article discusses the relevance of historical data when evaluating valuation percentiles [5] - It highlights that the choice of 3-year, 5-year, or 10-year data should depend on whether it covers extreme bear markets [5] - Specific examples of significant bear markets in A-shares are mentioned, such as the period from 2012 to 2014, which marked the lowest valuations for large-cap stocks [5]

Core Viewpoint - The article emphasizes the importance of percentile as a reference indicator when investing in index funds, suggesting that low percentile investments may present potential opportunities. However, it also warns that relying solely on percentiles can carry risks due to various factors affecting their reliability [1][4]. Summary by Sections Types of Percentiles - There are two types of percentiles: 1. **Time Percentile**: Indicates the current valuation's position within historical valuations over a specific period. For example, if the current valuation is lower than 90% of the valuations in the last five years, it is at the 10th percentile [2]. 2. **Space Percentile**: Represents the current valuation's position between the historical minimum and maximum valuations. For instance, if the historical minimum P/E ratio is 10 and the maximum is 50, a current P/E of 20 would place it at the 25th percentile [2]. Risks of Solely Relying on Percentiles - Relying only on percentiles can lead to several risks: - **Short Index History**: If an index has only been established for a few years, its historical valuation reference may be limited, making it difficult to determine true undervaluation [5][6]. - **Changes in Index Rules**: Modifications to index rules can significantly alter valuation data, rendering previous historical valuations less relevant [7][8]. - **Different Valuation Weighting Algorithms**: Variations in how valuations are calculated can lead to discrepancies in percentiles. For example, changes in weighting from market cap to dividend yield can affect perceived valuations [9][10]. - **Profit Volatility**: Fluctuations in company earnings can distort P/E ratios, leading to misleading percentile readings. For instance, a surge in earnings can lower the P/E ratio, suggesting undervaluation when it may not be the case [11][12]. Conclusion - While valuation percentiles can provide valuable insights, low percentiles do not guarantee that an investment is undervalued. Factors such as short historical data, rule changes, different weighting methods, and earnings volatility must be considered for a comprehensive analysis [15].

Core Viewpoint - The article emphasizes the importance of percentile as a reference indicator when investing in index funds, suggesting that low percentile investments may present potential opportunities [1][6]. Summary by Sections Percentile Types - There are two types of percentiles: 1. **Time Percentile**: Indicates the current valuation's position within historical valuations over a specific time frame. For example, if the current valuation is lower than 90% of the valuations in the last five years, it is at the 10th percentile [3]. 2. **Space Percentile**: Represents the current valuation's position between the historical minimum and maximum valuations. For instance, if the historical minimum P/E ratio is 10 and the maximum is 50, a current P/E of 20 would place it at the 25th percentile [4]. Practical Investment Considerations - Time percentiles are more commonly used in actual investments, but relying solely on percentiles carries risks [5]. Risks of Relying Solely on Percentiles - **Risk 1**: Short index launch time can lead to low historical valuation reference value. For example, newly established indices may not provide a reliable bottom valuation due to limited historical data [9][10]. - **Risk 2**: Changes in index rules can significantly alter valuation data. For instance, the change in the China Securities 100 index from a market-cap-based selection to a leading strategy can affect historical valuation references [12][13]. - **Risk 3**: Different weighting algorithms for valuations can lead to changes in percentiles. For example, the China Securities Dividend Index's shift from market-cap weighting to dividend yield weighting has resulted in discrepancies in reported P/E ratios [14][18]. - **Risk 4**: Significant fluctuations in earnings can cause P/E percentiles to become misleading. For instance, if a company's earnings surge, the P/E ratio may appear low, creating a "value trap" scenario [20][21]. Conclusion - Investments with low percentiles are worth researching, but low percentiles do not guarantee undervaluation. Factors such as short historical data, changes in index rules, different valuation algorithms, and earnings volatility can lead to percentile failures, necessitating a detailed analysis of each situation [25][26].