The recent world market turmoil had present buying opportunities. Below are a few points to take note:
1. Make a list of the companies you want to buy cheap. Look for leaner businesses to invest in.
2. Don't stop looking for opportunities. They will be there. Great companies are often founded during tough times. They learn to be lean.
3. If a great investment comes along but the market is choppy, don't let that stop you. Just remember that sharp market moves over extend in both directions. So spread your purchases out over months or years if possible.
My SRS investment from 1st August 2014 to 31st July 2015 had managed to keep above water. It increased by only 2.6% in challenging market conditions.
Over the year I had been taking profit and built up a strong cash position. So far I had withdrawed twice total $110,000 from my SRS account. My SRS cash balance still stand at $49,000.
Just last month markets around the world had been going into tailspin. This had present buying opportunity. But I am not in a hurry to buy back stocks. Markets around the world are still facing headwind and the worse may not be over.
The recent news remind us 'Singapore may go into a technical recession.' The question is not whether we are about to go into recession but how deep or how draw-out the recession could be.
Singapore since independence had gone through 4 recessions: 1974, 1985, 1998 and the last time 2008. But it is important to remember that the economy operates in cycle.
It was through these economy cycle that stock market could get battered. But it is in beaten-down markets that we are likely to find bargains. We can take our time to cherry-pick fundamental sound stocks at bagain price. In an overpriced market, there is never anything worth buying. In fact we should be gradually selling down in an overpriced market.
Investing is a long term commitment. We may not be able to catch the market cycle. But being a long term investors at this point of time it is best to invest only in recession proof stocks such as:
Profitable medical companies
Cash rich companies
Companies able to generate rich cash flow
Companies that able to pay perputual dividend
Recession Or No Recession - Don't Lose Sleep Over It?
1. Making emotional investment decisions.
2. Unguided emotional investment decision.
3. Focusing on short-term market "noise".
4. Failed to have a financial plan.
5. Do not set clear financial goals.
6. Do not stay on course with their investments.
Many had made investment mistake by sold off all the stocks that made money prematurely & kept all the loss-making stocks. The true is that many of these stocks that sold for small profit turns out to be winners & some grow to multi-baggers.
Our decisions to buy or sell should be made based on the outlook of the company & not whether we had lost money on the stock. One way to overcome the difficulty of letting emotions get in the way of logic is to ignore entirely the price we have paid for a share. Instead focus on other attributes such as the dividend forecast the prospective earnings & the Net asset value.
What matters, instead is how much the investment is worth now. If it is significantly overvalued today, then we might consider selling it. If the shares are seriously undervalued, then it could be worth considering buying more.
This way we will gradually build a well diversified portfolio that has ample time to grow & some will grow to multi-baggers.
The economy & markets in 2015 have been volatile due to falling crude oil and commodities price, uncertainty on when the U.S. Federal Reserve will hike interest rate and mid-year Chinese stock market crash. Stock market world wide had been a college-coaster ride and mostly end lower in 2015.
Dow Jones Index:
31/12/2014 = 17,823
31/12/2015 = 17,425
Down 398 points (2.1%)
Hang Seng Index:
31/12/2014 = 23,605
31/12/2015 = 21,914
Down 1,691points (7.16%)
31/12/2014 = 3,365
31/11/2015 = 2,882
Down 483 points (14.35%)
In 2015 Singapore Stock Market is the worse performance. As we move forward to 2016, with 3 main issues in mind; Property, Interest Rate and Crude Oil Price:
PROPERTY - Will oversupply and cooling measures that lead to prices of property to stay depressed in Singapore in 2016?
INTEREST RATE HIKE - About 2 weeks ago the Fed voted to finally begin raising interest rates. Whether it will continue on that path until rates are "normal" again? How can investors take advantage of the Fed's interest rate hike?
CRUDE OIL PRICE - will crude oil price recover in 2016?
As very few people not even analyst can predict accurately what going to happen in 2016, but as investors I will focus more on the health of a company - its financial statements, business prospects and dividend yields.
2016 market likely be another volatile year, with uncertain economic growth. It is important to review and rebalance our financial portfolio to ensure that our portfolio continues to deliver the returns we expect to meet our long-term financial needs and objectives. Watch our cash flow and do not be caught by being over-leverage.