The last 2 weeks saw the worldwide market in a wild seesaw and I started to question myself on what to do if the drops continued through. Being one that started investing only in 2011, I had never experience a bear market akin the generation that never experience the Long Night in Game of Thrones. Therefore, this post shall help illustrate my thought process on my road map in case of a bear market.
A little background on what happened over the last week:
- On Wednesday, China cuts benchmark interest rates by 25 basis points to 4.6% and cuts banks' reserve requirement ratio by 50 basis points. This moves releases capital to stimulate the economy, as well as the possibility of propping up share price.
- On Black Monday, Dow Jones lost 1089 points on opening and claw back some losses to close down 586 points.
- VIX, which gives a measure of volatility in the market spiked to a intraday high of 53, highest since 2009
- Following which on Tuesday, STI lost 4.3% to close at 2843.39 (lowest close of the year)
"The cheaper things have become, the more I’ve wanted to buy".
- Warren Buffet
1. Keep Calm
Keep calm. Market volatility always exist in the market and good investors/traders should be steady and react calmly to the market. Draw out an investment plan and stick to it. Remember that stock investing is a long term commitment. These few months and years of volatility and news are just noises in your next 50 years of investing, assuming you are young. If you can be zen about living and religion, I'm sure you can translate the zen to investing. These moments shall pass and you should be looking at the larger picture eg. which companies have a competitive moat and can survive long? which companies are capable of generating long and sustainable earnings?
So start drawing a plan now and start following it!
2. Review Portfolio
All my stocks were taken a hit during the past month. Also, note that today's market posted a rally of which ST Engineering had an incredible 8% gain in a day. This meant the drop were even uglier somewhere during the month.
Example QN: Is there any particular stock I want to increase stake in especially with such discount?
HPH Trust: With the China market in such volatility and economy in much uncertainty, I would not like to increase exposure to this stock even given the good yield based on historic dividends. Personally, I feel that if there is to be another prolonged market downturn, it will probably come from China. With container port businesses very tied to economy, I will not risk being caught further in wrong side of trade
Bank of Ireland: Banks are not defensive in nature and coupled with the fact that it is a foreign stock, I definitely will not increase stake in BKIR
Singapore Post: Singpost has not had such
good price since 1 year ago. (Note how media normally use words like "low", "bad") At $1.78, the dividend yield is at 3.9%. It is very tempting to nibble at this stock. Singpost is a relatively defensive stock given its Mail business. However with the lower yield and newer businesses like Logistics and eCommerce, the status of Singpost being defensive is questionable. I would say Singpost at $1.78 is a
"meh" buy given my cursory analysis.
Straco: Straco is another business whose main revenue is generated from from the China. Unlike HPH Trust, I look more favourable to this stock and hope to accumulate more through the large bid spread in the stock. For example, Straco closed at $0.885 but nobody was above my buy queue of $0.805. With the eventual freeing up of China's economy, Straco can capitalise on China's transition to a consumer market. However, when I buy this stock, I should recognised that the gains will not be immediate since tourism is tight to economy strength as well.
ST Engineering: Among all of them, I would like to accumulate more on ST Eng the most. If recession is on us, ST Eng is a safe and defensive stock to own. With its 5% yield and a business that does not correlate much to the economy, this stock is the best to hold in a recession. If price goes down, give me more!! As in my earlier post, ST Engineering business has a long way to go given its ties to the Singapore's Defence Force and drop in price means I get to buy on discount.
