Tags: [equities, personal finance, personal finance in Singapore]
Image by MaestroBen via FlickrI posted this article a year ago on National Day last year, 9 August 2007 relating to fear, uncertainty and doubt in stock markets.
Given the current lacklustre stock market conditions due to Singapore’s slowing economy, there is some level of fear because the STI has not gained much in 2008. In addition, the subprime situation that reared its ugly head is still affecting banks globally as they continue to announce write-downs and losses from their investment banking operations.
My portfolio is about 22% in cash and cash equivalents with 78% invested in stocks listed on SGX. While my portfolio is not performing as most are blue-chips that are correlated to STI, it still generates some dividends that give a better return than 1% Fairprice plus savings account. What will I do now amid this fear, uncertainty and doubt in the markets. Continue to watch but avoid commiting new monies to the market as my self-imposed limits on portfolio allocation is not more than 80% in equities. Basically, now is to hold and try to get rid of the laggards that I bought at toppish prices just before sub-prime last year. May end up attending the AGMs of such companies if I become a long-term holder. 
How do you handle the fear, uncertainty and doubt that afflicts markets from time to time?
Let’s hear from you in the comments section.
Be well and prosper.
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7 Comments to this entry.
Hi Panzer,
I think my days in soccer betting helps I guess. Imagine punting 1K on a 90mins game . It’s either a win or loss all. Stocks on the other hand will not make you lose all your money unless it went bankrupt or I contra (which I never do). I always invest only if I have the cash and I always have the lose all mentality so I’m pretty numb to this.
Some of my stocks has dropped by 50% but I still don’t really feel the pain. Of course dividends and not constantly checking on the stock price helps too.
Hi Derek
Yes, it’s tough to see stocks tank. I have my share of duds as well and that’s why I try to invest in dividend yielding stocks nowadays.
The market appears to be factoring in the slowdown in the Singapore economy. I’m more or less sidelined and have become less invested in the market. Equities comprised almost 90% of my liquid assets at one stage but I have since pared them down to more reasonable levels.
Be well and prosper.
Hi Panzer,
As markets go lower (as they always will) as a result of economic uncertainty, inflation and high oil prices, risk decreases as it makes valuations lower and companies cheaper. Such times are really the best times to purchase stocks in good companies to hold for long-term capital appreciation and dividend. The time to consider buying companies is when no one wants them, otherwise they are likely to be over-hyped and over-valued (e.g. Cosco at S$8.00 !).
Of course, one has to be emotionally and financially ready for setbacks and bear markets and to see the value of one’s holdings plummet. Such is the nature of markets and an investor’s sentiment should not be swayed by the emotional mood swings of Mr. Market. I’ve learnt that as long as the underlying business is doing well and if you bought at a margin of safety, you need not fear a bear market; in fact you should embrace it to buy more. Those who should be fearful are those who bought without knowing what they are buying (like taking unknown medication prescribed by a charlatan) or those who bought at high valuations at the turning point of the bull market.
That said, equities is still preferred by myself to unit trusts as they pay dividends (hardly any UT pay dividends), plus there are no recurring “fees” to foot. Of course, for equities one must invest a lot more time and effort to sift out the good bargains, and also be able to evaluate financially and qualitatively how attractive an opportunity is. When you have conviction, purchase as much stock as possible while leaving some emergency and opportunity fund for possible future purchases.
Regards,
Musicwhiz
Hi Musicwhiz
What you say is so very true. But it goes against the natural tendencies for us to be fearful of low prices going lower!
But I agree that one should have an emergency fund first as a buffer before commiting resources to stock market. I have my emergency fund in place and thus cap my equity exposures to not more than 20% of my liquid assets in general. But I have violated that cap before and it made me a bit nervous…hahahha….
panzers last blog post..Citibank Maxisave Sweep Account Interest Rates Revised upwards for balances exceeding $50,000
I stopped reading stockbroker’s reports,ST’s financial section and ‘almost’ do the opposite to what those bank relationship mgrs tell customers to do. It insulates me from panic attacks.
I stayed away from penny stocks, high interest FCFD because I haven’t the luxury of time to monitor changes.
I learn to stare at graphs, ratios and AR to make my own conclusions. But battling greed is an endeavour.
Hi Panzer.
Indeed, it can be gut wrenching to see some stocks drop to “ridiculous” levels.
Investing in High dividend stocksREITS or trust do insulate your portolio. but cash is still king!
Hi Musicwhiz, I disagree with your take on the Unit Trust dividend issue. Do take into consideration that the NAV of the UT do increase dispite the fact that no dividends is issued.
@Dsea
Yes, when fundamentals are overturned in the super-low valuations. We wonder if we were the rational ones who made the decision to buy the stock based on available information in the first place?
But then, the market is made of people. People are generally prone to fear, uncertainty and doubt.
@Zitrone
A contrarian strategy tends to be more successful but scary because it’s tough to be in front of the herd! You don’t want to be eaten up by the predators and yet those who follow the herd tend to fall prey more than contrarians.
Panzers last blog post..Citibank Maxisave Sweep Account Interest Rates Revised upwards for balances exceeding $50,000
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