Should I be surprised? Thanos Trump just snapped his fingers again and the US stock markets (and probably the rest of the world come Monday) had a rude shock and reacted violently. (Sign) … how should we invest in such turbulent and uncertain times? Even big corporations are struggling with investment decisions now with so much flux in the market environment.
I hope by sharing my thoughts, I will also get your advice to finetune my strategy further.
First question, should we stay invested or withdraw totally from the stock markets?
I think we should stay invested. Corporations are known to be very adaptive and responsive organisations. Good and well run corporations are known to respond appropriately to external changes, readjust their strategy and re-optimise their operating plans and investments to bring long term returns to their shareholders. Someone still have to manufacture the goods and provide the services that we need. However, as investors, I guess we have to stomach potentially lower returns and/or ride through the unpredictability.
To help me on this, I have a regular investment plan with POSB Invest. It takes out the emotion roller coaster, the temptation to time the market and not to be a trader. I am on this plan for 2+ years already and I have not sold any of the units that they bought for me since then. I will continue with this as long as I can continue to afford to fund it with an active income.
We don’t have to invest all our money in equities. We should spread out our sources of income and diversify.
For Singaporeans, the Singapore Saving Bonds (SSB) is a great investment tool to diversify your portfolio with AAA rated bonds and retain certain flexibility and liquidity. If you have not invested in it yet, check it out and be convinced that it is the best thing in the market for all of us at the moment. I know their rates have been dropping (along with the market trends) but given the uncertainty in the world now, having some certainty in your returns is a great assurance.
Singapore Government Bonds is also a great investment option though it is less flexibility than SSB. I have faith in the financial strength of our government and hence, I strongly recommend you to have a look at it.
In fluid situations like this, it is useful to have a sizable warchest to capitalise on “black Swan” event or shocks like what we may see on Monday. If you can stomach volatility, such events are the best time to buy. When everyone is running away, it is the time to enter and hunt for bargain.
But make sure we invest in companies that are solid with an economic moat, have a sustainable ability to pay dividends and is led by capable and visionary leaders.
Unfortunately, I had used up quite a fair bit of my warchest and invested in Hong Kong Land lately, so my capacity for a sizable investment is limited. Maybe I can use my CPF OA though the price to pay is high as I will have to forgo at least 2.5% guaranteed return. It will take something extreme to force my hands on this.
Last but not least, if you have not borrowed to invest and you have been investing in solid companies, then don’t panic even in a meltdown.
Well run corporations have the ability to stay resilient in uncertainty, ride through the volatility to survive and bounce back up when the economic situation and market environment improves.
Selling in the meltdown while hoping to buy back at a cheaper price will not work for us as retail investors.
We just do not have the time and ability to monitor the market constantly and to get the latest news. By the time the news reaches us, institutional investors would have already reacted and often we are left with the crumbs (or worst, losses).
I have been through several painful episodes over the years thinking that I could outsmart the market but I was proven wrong badly time and again. Hence, please take my painful lessons and avoid yours.
I am sure many of you would find what I mentioned above familiar. Still, I hope some of you will find it useful. At the very least, I hope it serves as a good reminder especially on the point of “DON’T PANIC”. By the way, that’s how many people lost money in the stock market 😦
I welcome you to share your story and advice.
Thanks, have a great weekend.