STE's Stocks Investing Journey

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.

<image credit to focuspointtechnologies.com> Nothing last forever, everything moves in a  cycle like four seasons, we have a rough and roller coastal ride on our stocks market in the last two weeks.  World stocks market finally succumbed to this “deadly and widely spread Covid-19 “ pandemic and most of it enters bear market territory in just two weeks of continuous & severe plunging. The magnitude of the fall accelerated by the “tumbled “ of oil price due to OPEC’s failure to come to an agreement on supply cut, it doesn’t help during this low demand situation due to Covid-19 pandemic, a kind of double whammy impact.

image credit to newscientist.com There was no “January Effect“ for world stock markets as far as 2020 is concerned. Just as the world economy appeared to emerge from the uncertainty of trade-war after the signing of “phase one” trade deal between the US and China, the world economy has been hit by another crisis of new coronavirus outbreak started from Wuhan China which has already taken a heavy toll.     Coronavirus: China's stock market plummets as the country's death toll climb past 360 – live updates   <link> The WHO has made it official that this is a “ Global Health Emergency “ and many countries had also taken extra measures to contain or deter the virus from getting into their countries by restricting travellers from China or those been visiting China before.

I have done less transaction in 1st Qtr 2019 vs 1st Qtr 2018 although the market has gone up much from the low recorded at the end of last year  In line other with world stocks market, STI also performed well in 1st Qtr, up by +8.02% to 3315  as of writing and my portfolio managed to outperformed market by few % points with ROI of +12% YTD, mainly due to better performance from REITs. Five Best-Performing S-REITs Average 20% Total Return in YTD   <from SGX.com>

image credit to trumpexcel.com According to “ Fama & French Forum: “ Distributions of daily and monthly stock returns are rather symmetric about their means, but the tails are fatter (i.e., there are more outliers) than would be expected with normal distributions. (This topic takes up half of Eugene F. Fama's 1964 PhD thesis. Eugene Fama is the 2013 Nobel laureate in economic sciences )  In the old literature on this issue, the popular alternatives to the normal distributions were non-normal symmetric stable distributions (which are fat-tailed relative to the normal ) and t-distributions with low degrees of freedom (which are also fat-tailed). The message for investors is: expect extreme returns, negative as well as positive. “

Forecasting or predicting the market movement Sometimes I have been asked by friends on how well the market or certain stocks perform in coming months or what will be the direction of index moving towards in next year or so.  Even in every investment seminars, one may notice that the most question people like to ask those investment “ Gurus “ will be “ how do you think the prospect of STI index in 20XX ? or What do you think about the performance of the Bank / O&G / property sector in the next few months?

Before I start to explain the 3 rd and 4 th elements, allow me to quote below from Warren Buffet which is very much related today’s blog post :