Stock Market Crash : DJ just fell more than 1000 points!!
DJ falls more than 1000 points!! STI sinks more than 100 points!! Nikkei 225 plunges more than 1000 points. You will see such news headline on every major financial news portal in last 2 days. Well , finally the long-awaited market correction is here and is quite normal to have market correction of -5 to -15% in any market cycle especially when we have experienced such long bull market since GFC in 2008.
We must always remember that market is about “ psychology “ and full of “euphoria and panic “ from time to time…
Some of my friends call or message me , asking what am I doing in such situation , did I sell my stocks to take cover or buy in dips to take opportunity in this market correction ? NO , basically I do nothing , no panic selling and buying , continue to go out in early morning for our usual morning walk and catching Pokemon….. and I just realized that our portfolio value has dropped by more than -$100 K since last 2 days.
As I mentioned before, it’s quite normal for market to pull back from the height or top of the peak and it is well too early to deploy my war chest at this point of time since market may go down further if we are going to experience crisis or bear market, so called.
Normally , I will do the re-balancing of my portfolio by selling some "over-value stocks "like Capital Comm Reit ( in my opinion ) and move into some cyclical drop value stocks like " Comfort DelGro or SIN TEL " (again , is also base on my own opinion ) , it doesn't really use my war-chest in this case. Also , reducing my stakes in some of the " industrial REITs " and moved into some newly picked counters ( which I will highlight in next Portfolio updates).
** Base on above , it is quite common to see market return of 0 to -20%
Although the “trigger point “ or reason for such “flash crash” or panic selling may not be known or clear , but a full-blown of financial crisis will take sometimes to develop, where in normal case , it may take a year to reach the bottom. As such, If we buy in dip for every single drop of 1-2% in market correction, we may end up using all our war-chest soon before the real crisis hit.
Be Patient and stay disciplined
In deploying your war-chest, one will really need to have patience and discipline, for me , I will not try to be smart or predicting how much market will drop further or re-bound soon. But at least I have clear strategy on how I should deploy my war-chest in stage.
I try to split my war chest into 4 buckets of fund and starts to buy when market drop more than -15% to 20% and subsequently -20 to 30% , - 30 to 40% and the last will be the real crisis where market dropped more than -40% ( like previous GFC in 2008 that we have seen before ), by that time, most of our war-chest shall be depleted and if are really aggressive and he/she may opt for taking some “leverage “ to buy , but bear in mind that this must be taken in very careful and after thorough consideration of you financial situation.
The reward could be really “tremendous and extraordinary “ if one really buy in time of crisis , we knew that and history repeat itself …just need to ensure that you are buying those strong fundamental ( GLC back) companies that will not into trouble during crisis. Well , basically some of the banks are good bet during crisis.
Please fasten your seat-belts, it’s going to be a bumpy ride in months ahead !!
If you can't sleep well due to this market volatility , may be you are too much in stocks or the stocks market are simply not for you.
“Stock market corrections, although painful at the time, are actually a very healthy part of the whole mechanism, because there are always speculative excesses that develop, particularly during the long bull market.” Ron Chernow
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