The first half of 2018 has come and gone. All of a sudden, the market looks gloomier now than at the start of the year. It has been hit from many fronts including the rise in US interest rate, rise in crude oil price (aka inflation), rise in protectionism with trade war looming between US and China, Europe, Canada plus others, rise in Middle East tension and apparent slowdown in China economy.
Our local market was not spared. Compared to end 2017, it has declined 6.5% and compared to the peak in early May, the drop was a staggering 10.5%. It is not as bad as the China market which officially entered into the bear last week when it lost 20% from its peak. It looks like the “10th year major correction” may happen this year, after delaying by a year. Senior investors will remember the 1997 and 2007 crisis.
With most of my investments in Singapore and in equities, I am not surprised (though still feel the pain) that my net worth peaked in early May and then started a decline that mirrored the STI by losing 6%, despite some capital injection from savings from salary and dividends. As shared earlier, the saving grace is that I have dividends amounting to 3.5% of my portfolio. If not, I think my loss would have widened to 8-9%. Very Painful Indeed !
Reflecting back at the changes in my portfolio in the last 6 months, I realised I have …
- Maxed out my Singapore Saving Bond with rising yields
- Moved more into index fund (ETF), increasing the value of my index portfolio by 50%
- Doubled my direct exposure to HK and US stocks, i.e diversified further away from Singapore, although they are still very small compared to my investment in Singapore listed companies
- Reduced SReits and Corporate Bonds exposure and switching funds to S’pore Equities and Business Trust (mainly due to Netlink Trust).
- Reduced concentration of my Top 10 stocks from 52% to 43%.
- Started small investment using margin financing
In my next few blogs, I will share more details on the above including my personal learning.
I have been thinking … in the midst of all these pessimism, what should we do? Allow me to share my thoughts and I thought you can share yours with me too …
- Stay invested regularly => we do not know where is the bottom as much as we do not know where is the peak. In a declining market, if you have cash, then it is a great opportunity to accumulate good companies that have strong economic moat, growing business and can pay sustainable dividends in the foreseeable future at attractive price. Even if you do not know what to buy, you can just buy index fund.
- Keep a warchest => to be used in a black swan event => when investors have a pessimistic outlook, every bad news is magnified and exaggerated. If you know the true value of the company, you can invest boldly and reap a handsome return.
- Don’t do panic selling => believe in your judgement especially if you have put in efforts to research the company
- Switch from weak to strong companies => when investors are in panic, there will be widespread and indiscriminate selling, take the opportunity to get out of weak companies, correct your mistake and invest in stronger companies.
- Always ready to enter the market => Do more research to discover and create a list of companies that you will invest decisively when the price is right. Hard work always pay
- Stay positive, be patient and be comforted by the dividends that you receive in the time being. Patience is the most important virtue of a successful investor (I still have a lot to learn in this)
Hope the sharing of my thoughts above are useful for you. Happy to receive your thoughts too.