Sunday, 12 April 2020

What Should I Do in Stock Market Now?

This topic is probably one of the most talked about now?

What should I do in the stock market now? “If I have x amount of money, and tell me which stocks should I invest so that I can make maximum profit in the shortest time. It is not my concern about understanding the stock market, I just want to know if I should put in money now or later?”

If you are having the aforesaid mindset, it is likely that you will be disappointed by this article because it is impossible for me to provide you with tips that can make you be rich in the shortest possible time.

Nonetheless, I still provide my advice and what exactly I will do at the part of the conclusion.
For now, I really hope you can finish reading this article as it may be able to give you the true insight, rather than soothing words that deceive.

Stock Market not as lucrative as you think?

Do not be fooled by all those who taught making quick money in short time. Just like any other things in life, to be successful, you need hardwork, an expanse of knowledge and experiences over a long period of time.

One of my ex-bosses in his 60s who was a shrewd businessman also invested in the stock market for 30 years. He told me for 30 years, his stock market returns are almost no return, and perhaps even negative. On the contrary, he owned many properties and generates very lucrative returns. Of course, running and eventually selling his businesses gave him the most returns!

For me, it is quite similar. My stock market realised returns are not as lucrative thus far. The size of my financial portfolio is mainly coming from my work income. While not to boast, but I really work hard and diligently in my career. Another part of my portfolio is also from the properties owned, in which mortgage owed versus sell value is very low.

Money aside, I seriously learnt lot of things in the investment journey. I hated reading books in the past and never truly wrote articles in my life. However, because of investment, I dwell into reading and extensive research to understand things from different perspectives. I also fortified my financial knowledge apart from my engineering background. Then there is also learning from others, taking action, making failures and then learnt from mistakes.

Typical mainstream mindset

Gambler and opportunist
The short-term profit mindset is dangerous. It is gambling and can never generate sustain returns over long term. You may win this time, but next time, you can lose bigger. Also, you will be driven by emotions by the up and down swing of the market.

For example, I have a friend that when the Market started crashing in the middle of March, he was telling that STI will definitely goes below 2000. He wanted to wait for STI to drop below 2000. He reckoned it will be one of the worst crashes in history of STI. Then in the past week or so, when Dow Jones or STI continues its rally, he kept highlighting to me that market is rising and he started to worry of missing the opportunity of buying the bottom.

Self-proclaimed value investor
Likewise, the so-called long-term self-proclaimed value investor, but with refusal to learn and understand the fundamentals of the global financial market and big picture, is also equally dangerous. Maybe even worse off! This is because not only they cannot generate long term returns, they will be wasting a lot of time and effort for very little returns.

For instance, all the oil darling stocks in SGX from 2010 to 2014, no matter how well run they are, if the “big picture” oil price crash, they cannot escape reality of price crash. Once upon a time, Nokia was such an incredible company. But, the big picture of technology makes the company obsolete. Next, the former Valeant Pharmaceuticals had stock price risen from US$15to US$250 from 2010-2015, before crashing to less than US$10 due to evil ethnics in running the business being exposed by people with real knowledge in the industry.

The bigger picture, timing, as well as the knowledge of real business is important in stock investment and not just fundamental analysis or our self-proclaimed valued-investor title.

Herd Behavior

This is called herd behavior and it is the most common behavior that you and me can experience in a stock market. As described in the internet, Herd behavior is the behavior of individuals in a group acting collectively without centralized direction. What do we mean by “Acting collectively together”? In stock market, it simply means influenced by masses and act based on what we see now.

Several years back, I written an article “My Rewards from Learning Investmentand in it, I also explained why the majority mainstream is always wrong as most of the times, they only pay attention to themselves, their self-benefit in the short term.

It is the love of the truth! Understand the bigger picture

Instead, we must have “the love of the truth”.  The love to find out the cause and the effect throughout history, which leads to the system of today. And to understand what is inherently wrong in our current system or a company, and ultimately what is wrong will gets more wrong, and eventually leading to the truth which will destroy what is wrong.  

The first most important thing is to understand not just what, but also why the happenings in the world today. It is not just about the Corona Virus. It is not just about SG and STI. It is also not just about the stock market in the world. It is the understanding of the entire global financial system, going back into history and what is currently happening. It is about the Past, the Big picture and then the Localized picture.

This is quite complex as we have to understand Global financial situation and requires lots of reading and research, coupled with years of experiences. Then the understanding of yourself, and taking action, fail, learn and improve over time. It is not just about choosing one stock and boom, I earn XX amount of money over a very short period of time? Nothing in this world comes easy and fast. Even if it comes fast, it will go fast! So STOP DREAMING about quick success!

Understand History

Understanding history is important. The farther back you look and understand, the further ahead you can see, even when it has yet to take place. Therefore, it is beneficial to know the history of money (gold and silver), history of Federal Reserves (why USD as world reserves), history of past crisis (Great Depression, why World War took place, why GFC takes place), history of stock market behaviors in various crashes (charts) etc. Eventually how all these impacts will affect inter-countries. For instance, how the economy of USA and Europe or China will impact Singapore for that matter. The great investors of today’s time such as Ray Dalio and Jim Rogers studied history of the markets extensively.

I also written a lot of articles in the past. Refer to below.

Conclusion

Love the truth of this world. Read and research, and maybe also write about history of the financial markets. Once you understand the core fundamentals of why things are as it is today, then you will not be driven by irrational behaviors of the stock markets. In the process of acquiring the truth, you can try out your investments and see how you perform. Afterall, life is not just theory but practical and also about results. If you fail or lost money, make sure it is not your entirety and you can always bounce back. Learn and improve and produce better results the next time round. With extensive experiences and knowledge of the past, present and possibly foretelling the future, naturally you will have your own beliefs. With this faith, you can then formulate a direction or strategy based on your own personality. Know yourself. Do not follow others blindly.

Finally, what you should do now in the current stock market?

Who am I to tell you what you should do specifically in the stock market? Maybe I tell you what I have done so far RECENTLY:

What I have before the crash
After the oil crisis in 2015 onwards, and saw my entire office colleagues retrenched, I learnt to prepare for the worst. I believe financial systems fundamentally wrong with too much debts and eventually it will crash. It’s going to be ugly.  Hence, sold off a lot of my stocks in 2016, and put into Cash and Precious metals and a very little into Crypto. Focus on family and work life from 2016 to 2019. Never really invest until recently.

Recent Profit Taking
-       Sold off my good stock Keppel DC Reit which gave me more than double bagger.
-       Sold off my paper gold to take profit from my initial trades in 2016. Keep my physical Gold.
-       Sold off Bitcoin to take profits from my initial trades in early 2019.

Recent Purchase
-       Bought STI below 2.5K
-       Average down on SPH Reit.

Recent Shorting
-       Learn simple shorting of stock and without question pay a small sum of school fees.
-       Good experience in losing money. That is the only way to learn.

Beliefs
-       Dow Jones is still very expensive at 23-24K.
-       Unemployment in USA is 17 millions (>10%) second highest to Great Depression and yet Dow Jones is rallying.
-       Market is irrational. Fundamentals will surface. Not because of Covid-19 but because of the excess liquidity and debts.  

What to do now
-       Market is unpredictable now.
-       SO DO NOTHING FOR NOW! WAIT AND SEE!  


READ: 




The Fallacy of "How to be Rich" (Part 1)



8 comments:

  1. Thank you for the article , very enlightening ! ��

    ReplyDelete
  2. Interesting! May I ask what you'll be looking for in our local Singapore market? E.g. further 20% drop in certain blue chips like the banks or pedigree reits like mapletree & capitaland ones? Or some positive outcome for vaccine trials?

    STI valuation recently dropped below GFC level especially from 18 to 24 March. While earnings estimates will drop further, I'm thinking the valuation will still be close to GFC levels.

    I bought a tiny bit of DBS & OCBC from 20 to 25 March. But still mostly in cash and wondering when to buy again? Stocks have zoomed up and don't seem as good value now? I'm aiming for investment horizon of 5 years.

    Thank you!

    ReplyDelete
  3. I had a watchlist https://www.rolfsuey.com/2020/03/stocks-on-watchlist.html?m=1
    Purchase will likely based on judgement on peak to trough pricing as reference.

    Also, had recent previous articles detailing how to invest in STI as it drops lower...

    STI valuation actually not accurate. How do u actually knows the earnings of Q1,2,3,4 -2020 yet. You cannot use current PE to compare. It must be forward PE estimates. So perhaps not a good comparison.

    cannot compare GFC and Covid19, bcos we tend to localize comparisons which in my opinion is wrong. Bcos we miss out the bigger picture. Covid19 is a disease, if vaccine found, everybody happy.

    But 2-3 months 1/2 of the world shut down. We probably forget how much the world has to spend to cover back the losses. And 17 millions of Americans unemployed. Do we think other countries in Europe unemployment rate will not go up! Even if Covid situation improves, people worry of 2nd wave or too many unknown, people will be cautious to hire or expand.

    There will be repercussions which will surface later. There can be social unrest also in other countries, causing riots if things worsen between the “have not” and the “haves”. Let’s hope not.

    Stocks good value or not is fair to say. Reference to which year do u say good value? Reference to what forward environment and resilience of stocks.

    Prior to Great Depression, eg in 1928-29, you may say stock is good value reference to previous years. unfortunately, Great Depression took almost 1 decade to recover.

    Investing in 2 Banks may not be most advisable. But you have to know what your preference.

    To me, investment is about creating a portfolio. A portfolio of stocks (diff), cash, precious metals, bonds etc. Perhaps looking at particular stocks is also ok, but ideally a balance portfolio or what we called more all weather portfolio.
    Eg two stocks don’t normally fall drastically unless major recession, bcos they are diff in industry and nature.

    ReplyDelete
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