1st Scenario - Technical Rebound
Not that I am bullish about banks now, but for reasons of speculative trading and hoping for a technical rebound after I think banks were truly oversold since the start of the year. This period also see the local three banks go below their book values, which is unheard of even during the GFC. Need to set sell price though in case there are truly rebounds up in pricing. I shall let you to decide on your own sell price! J
2nd Scenario – Plunge further down
Don’t get me wrong, I still have lots of faith about Singapore banks in the long term, but just that I am not too sure if taking a long time view now about our banks NOW is the correct timing. Ok, Warren Buffett says you cannot time the market. Duh L!
Well, in case my speculation is wrong and markets are to tank further down, and my bank stocks tumbles in tandem, then the second layer of safety for me is not overly committed in this purchase with reference to my entire position. And yet still in a manner, which I am still comfortable to average down later. When? I left this difficult question for you to ponder for yourself.
Rolf’s hedge against both scenarios
The thing about investing is you are never certain to be right all the times even if you are value investors Warren Buffett and Peter Lynch, or famous hedge fund managers George Soros and Ray Dalio.
The most important thing for average investor like me is to be right for most of the time. Perhaps 7 out of 10 is great, or even 6 out of 10 is good. 8 out of 10 is definitely a bonus.
And even if I am wrong, I should already have a prior strategy what should I do next. The whole idea is to be in control in your positions and emotions, despite the violent swings in the market.