The 3 Most Important Charts On Investing


We know that market move in cycles and in upwards trend in the long run, for the past 200 years. If you stretch the investment time horizon to a much longer period, you will see that every crisis was just a "blip"  in time.

Image credit to: stockmarketalmanac.co.uk.com>


Every crisis, be it caused by war, oil crisis, financial (sub-prime) or even current crisis of COVID 19 will pass eventually. Some companies may collapse during the crisis (even a 100 years old company), therefore it is important to have a diversified portfolio with fundamentally strong companies.





Three Most Important Charts On Investing


As I blogged before "Are Stock Returns Normally Distributed?" 


We know that stock market returns are not perfectly in "normal distribution " but skewed towards +ve returns in the long run.

<Image credit to: investmentoffice.com>


Time In the Market vs Timing The Market


Of course, if one can really "time the market" well and sell in early 2020 and buy back eventually after 23 March when the market hit bottom, the return will be exceptionally good. But in reality, I think not many people would be able to do that due to our emotional biases of fear and greed.

But I think you will be fine even stayed the course during this pandemic and keep it for next 5-10 years, provided the stocks you picked does not go "kaput" like my big mistake of "Eagle HT".

Since STI is still close to -1SD, the chances of winning the market are much higher if you were to invest now and keep it for more than 5 years time.



<Image credit to: sbnonline.com>




If you are betting stock on a daily basis, the chances of win/loss are almost equal at 52%, like playing "big/ small" in a casino. The chances of winning the market increase when you invest more than 5 years.  The stock market is going to be very volatile during the pandemic time and if you are not prepared to hold your stocks for more than 5 years, maybe investing in the stock market is not for you at this point of time.



Black Swan (Crisis) Tend To Follow By White Swan ( Opportunities)




<Image credit to: advisor.visualcapitalist.com>



I think this chart speaks for itself perfectly that every crisis will follow by a strong rebound, will it be different this time around?


What Happens To The Stock Market After A Recession? <source: Forbes.com>


Ready to quarantine the losses

"According to Dimensional, in the one, three, and five years following a correction up to a bear market (20% decline from recent highs), the stock market has averaged an annualized return of nearly 10% across all time periods."


As mentioned earlier, investing during a crisis is tough and one will need to have a very strong emotion to stay the course, looking at the losses of our portfolio from time to time. Stocks investing may not be suitable for everyone if you are losing sleep over your investment, it might be the time for you to reconsider your portfolio allocation, base on your risk tolerance.



Cheers !


STE




" Quote Of The Day "

"Discipline and patience are two traits needed by individuals who decide to invest in the stock market. Market stability is not always a given, and there will be periods when the market may be volatile. This happens particularly in the event of a major disaster or crisis..."




Comments

  1. Strong holders can choose to stay but weak holders may be forced to stay out or get wipe out.

    ReplyDelete
    Replies
    1. Yah, depends on our holding power and worse still if we are using " leverage" or margin to invest.....

      Delete
  2. Hi STE. Good to see your posting again. I am more kiasi so I used 10Y instead or 5Y. LOL.

    ReplyDelete
    Replies
    1. Hi Henry,
      Thanks for the comments, Yah... sometimes " kiasi" is good to avoid so many "minefield" or "value trap" in investing ....Cheers ! :D

      Delete
  3. Thank you for writing such a nice blog with useful information. If you Looking for buy property in Singapore then Find your perfect property with Realtor Patrick Search the latest listings for real estate & property for sale in Singapore. Realtor Patrick Singapore

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