How to apply the dumbbell strategy amid performance divergence and geopolitical disturbances?

Currently, the A-share market’s annual report and first-quarter report disclosure season is coming to an end, with companies exceeding or falling short of expectations competing on the same stage, and overseas geopolitical situations also bringing some uncertainties. In this environment of “performance divergence above and uncertainty outside,” it is not very prudent to concentrate funds in a single style. The “dumbbell strategy” has become a preferred approach for many investors—one end focuses on offense, while the other emphasizes defense, striving to balance both.

One end of the dumbbell needs to undertake the “offensive” task. During the earnings disclosure period, simply looking at past financial report growth indices may be lagging, as stock prices may have already partially reflected historical performance. The Guozhen Growth 100 Index may be somewhat different; its stock selection logic is more “forward-looking”—using forward-looking indicators such as consensus expected net profit growth rate and expected ROE changes to select stocks, rather than relying solely on past realized financial data. Currently, the index weights focus on high-growth sectors such as AI computing power, communications, and electronics, with a high concentration of weights—over 65% in the top three industries. When industry trends are upward, this may provide some resilience. For investors who wish to retain growth participation amid volatility, the E Fund Growth ETF (159259) could serve as an “offensive” option within the dumbbell strategy.

Figure: Cumulative Return Chart of Guozhen Growth 100 Index

Data source: Wind, the index is the Guozhen Growth 100 Total Return Index (480080.CNI), with the period from March 27, 2020, to April 27, 2026. The above is only an objective display of the past performance of the Guozhen Growth 100 Index and does not represent future performance of the index and related funds, nor does it guarantee any investment returns or constitute investment advice. The index compilation scheme may be adjusted in the future. Funds are risky; investment should be cautious.

The other end of the dumbbell needs to be “stable.” During the performance divergence period at the end of April, the defensive value of high-dividend assets may become more prominent. The CSI Red Chip Dividend Index focuses on industry leaders with strong dividend-paying ability and willingness, whose dividends may provide some downside buffer for the portfolio. Meanwhile, the CSI Value 100 Index considers low valuation, ample cash flow, and dividend-paying capacity, using a multi-dimensional valuation system to select stocks, which may help preserve some valuation recovery potential on top of defense.

Table: Top 5 industry distributions of the CSI Value 100, CSI Red Chip Dividend, and Guozhen Growth 100 indices by Shenwan First-Level Industry

Data source: Wind, as of April 27, 2026

Currently, the divergence in A-share earnings disclosures, combined with geopolitical factors, increases the likelihood of systemic volatility. Fully committing to offense may risk underperformance if earnings fall short of expectations, while fully adopting a defensive stance might miss structural opportunities. The core of the dumbbell strategy may lie in “not betting on a single direction,” allowing the Guozhen Growth 100 Index’s “expectation-driven” approach to capture industry trends, while the CSI Red Chip Dividend and CSI Value 100 indices’ “dividends + low valuation” approach attempt to safeguard the bottom line. The low correlation between assets at both ends may help smooth overall portfolio volatility.

Of course, every strategy has its applicable boundary conditions. Investors should adjust the allocation between the two ends based on their risk tolerance and investment horizon. If you are concerned about short-term volatility, you might increase the defensive weight; if you are optimistic about continued growth style, you could increase the offensive allocation. In this complex period where performance and geopolitics intertwine, capturing structural market opportunities through a growth and dividend dumbbell combination may be a viable strategy to consider.

Value ETF E Fund (159263; Connect Fund A/C: 025497/025498)

Mainly covers high-dividend companies in home appliances, banking, and automotive sectors, allocating to undervalued, high-dividend, and cash-rich enterprises.

Dividend ETF E Fund (515180; Connect Fund A/C: 009051/009052)

Mainly covers banks, coal, and transportation sectors, focusing on A-share companies with high dividend yields and stable dividends. It leads in size among products tracking the same index and has low fees, with management and custody fees at 20 basis points per year.

Growth ETF E Fund (159259)

Mainly covers electronics, electrical equipment, and communications sectors, reflecting stock price changes of listed companies with prominent growth styles on the Shanghai, Shenzhen, and Beijing exchanges. The index uses indicators such as two-year consensus expected net profit CAGR and next-year consensus ROE YoY growth to select constituents, with quarterly rebalancing to adapt flexibly to market changes.