To many new investors and those who have money on the table (i.e. equities, forex, property etc.) at this point in time. It is not a fun time at all because the market growth (do I daresay “bubble”?) since the 2008 global financial crisis is starting to unravel the profits and gains accumulated since that period.
At this point in time, the STI has falled below the psychologically important 3,000 points. So where does that leave us?
I don’t know where the market is going but what I know is how I felt going through the previous few financial crisis as someone who had started working in 1995.
The Asian financial crisis in 1997 did not affect me much because I was just starting out my career and most of my investments then were in savings and fixed deposits in Singapore. Hence, I was not exposed to the foreign exchange risks and how the overall financial markets tanked during that period.
But what I recalled was shared stories among colleagues and from my parents of people who they knew were retrenched or lost their jobs. That was the very first that I started to have an inkling about job security and how the regional markets and economies could hit one directly through affecting the industry in which one’s employer was in. In a way, some of my conservatism on personal finances and being concerned about financial freedom stems from knowing that the real world was both equally unpredictable and fraught with hidden risks.
The next stage was the dot.com burst which came when I happened to work in the IT industry. I was fortunate that my employer was a government-linked company (GLC) hence it had sufficient resources and contracts to ride out the dot.com burst. But I also saw first hand how colleagues who were poached to join dot.coms went over and were out of a job within a few months to a year of the dot.com crash. I also saw how due to declining profitability, some staff especially those in cost centres e.g. marketing were asked to go and the inherent unpredictability of “seasonal” plays (i.e. the whole internet bubble) in the markets.
By then I had invested in some bonds besides fixed deposits. I was also fortunate enough to cash out on some small number of stock options given by the GLC which was just a small additional year-end bonus before I left the company.
Since then, 2003 has SARS which affected Singapore equity markets. I was lucky to have started building my equities portfolio since that period and was out of pure dumb luck that I made money from my amateurish trading on equities.
By the time 2008 beckoned, the stock market corrected fairly quickly as the global financial markets came close to screeching to a jarring halt with the collapse and bail-outs (or not) of major institutions such as Lehman Brothers and AIG. The resultant fallout saw my equity portfolio facing a paper loss of high 5 digits. I bit the bullet and ate some of these losses but miraculously, through my dividends for those stocks I still held plus subsequent trades on stocks that had corrected, I narrowly avoided making a realised loss on my portfolio.
That was when I realised then one needed to have sufficient reserves to buy when asset values were cheap. Be it property, equities or other assets, one could have bought so many blue-chips at ridiculous prices and valuations.
Since then, I had taken a more conservative approach and set aside more cash. However, the market recovered and picked up since then and the resultant 7 year bull market for equities made me feel that I had missed out again on the bull-run. However, I was invested by then in some core-blue chips dividend paying shares, I had some decent dividends each year. Enough for extra bonus for the year but nothing to make me financially free or rich.
Now that the market has tanked, I realised I finally have some cash to take advantage and pick up good blue-chips for long term. I started to buy on the slide for a blue-chip but didn’t realise the correction was so rapid that I should have delayed my purchases but again I am taught the lesson that I cannot time the market 100%. Even buying at 52 week lows was not good enough as we are approaching newer lows.
All these experiences have taught me to first have a secure source of income. Whilst being financially free from portfolio investment is the dream, the reality is a combination of being good at your day-job and using the savings to build up one’s retirement fund outside of CPF. The investments gives us more options even if we find our employment to be something that is financially rewarding and meaningful. I have met an ex-classmate who semi-retired at his early 40s a few years back as he was in investment banking doing mergers and acquisitions and he confessed that he went back to work on a less hectic schedule because he was bored and realised his brain started to rot once he started his retirement from his career.
The other thing I realise is to have some reserves and not to be 100% invested in the market. Luckily I have still about 30% of my networth not invested so can still pick up some blue-chips when this correction has taken it course. I may not be able to time the bottom but I will be picking up solid blue-chips at good value and would be prepared to hold these and bequeath them to my daughter.
I wish all those vested best of luck to ride out this wave of downcycle. Some pessimists are predicting the start of recessionary phase for the region and Singapore.
Be well and Prosper.