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Are stock prices coming down but do we know what we are doing?

Wednesday, November 27, 2019

There has been talk about how a stock market crash is much overdue for some time now.

What do I think?

Well, I can tell you that the stock market will crash sometime in the future.

What I cannot tell you is when it would exactly happen.

Brilliant, isn't it?

Cannot go wrong with saying something like this.

I always say that we cannot predict when Mr. Market might go into a depression but we can most certainly prepare for it.

Think war chest.

Always have some money put aside in case opportunity knocks.

We don't have to be in a hurry to put all our money to work.

If there is nothing worth investing in, just sit on cash.

I certainly do not have any trouble sitting on cash and collecting dividends.

In fact, I rather like it.

Revisiting AK's strategy with Charlie Munger.

1. If we own stocks of good businesses that are able to generate meaningful income for us


2. if we did not use borrowed funds or use funds which we might need for other purposes to do so,

why do we have to worry about stock prices going down?

In fact, we should be happy because we would be able to buy more stocks and have a larger share of these businesses if prices go down.

As investors, we really don't have to look at prices every single day.

If we are speculators, that is a different thing.

So, if we find ourselves worrying about price movements, ask ourselves if we are investors or speculators?

It is a world of difference.

People do frequently get so confused.

The worst thing that can happen, in my opinion, is when speculators think that they are investors.

There is nothing wrong with speculating but we have to know that we are speculating.

Don't know what I mean?

For example, see:
Investing or speculating in real estate?

Now, what about being an investor or a trader?

Well, we can do both.

We can have some trading positions and some investments at the same time.

Indeed, I can be investing in a stock and trading it at the same time.

Remember trading around a core position?

Trading around a core position.

So, should we worry about stock prices coming down?

Well, we should really be asking if we know what we are doing?

"If you worry about corrections, you shouldn't own stocks." Warren Buffett

Watch the video:

Related posts:
1. Ready to come out on top? Part 1.
2. Ready to come out on top? Part 2.
3. Lost life savings and now in debt.
4. My final word on Bitcoin.


LKH said...

Appreciate your sharing. Are you able to share what is the percentage of your war chest? 20% of your total assets?

AK71 said...


What percentage of our portfolio to be kept in cash?

I don't have a hard and fast rule.

But I am rarely 100% invested.

When to be fully invested?

War chest should include money in the CPF OA and SRS as well. :)

30YearOldInvestor said...

Whoa AK!

you posted 3 posts in a week hahahaha.

I have been following what you share... sizing (according to our own size), and keeping cash. Holding power (money we don't need) is also allowing me to see how it is important (so don't have to liquidate unnecessarily)

Hope your NeverWinter is not so busy so you are bored and have time to talk to yourself more here hahaha.

All the best! Look forward to next AK and friends.


AK71 said...

Hi KC,

You so bad lor. :p

Contrary to what I thought would happen, Neverwinter has been a bit slow.

Hopefully, it picks up. ;)

AK and friends?

Still on a break. ;p

At least I still blog. ;)

If you are happy and you know it, clap your hands! ;p

streamyx88 said...

thanks for your sharing. i totally agree with you, it is important to identify if one is investing or speculating/trading. if one is investing in good dividend paying stocks, one should not worry too much when broad market is coming down and thus presents even better chance to buy at a more attractive price :)

AK71 said...

Hi streamyx88,

You have cracked the code! :D

I often see people who cannot tell the difference.

I even see confused bloggers or maybe they are trying to confuse people. ;p

VT said...

Waiting for cyberpunk 2077, like investing, time will reward the patience...;)

VT said...

Waiting for cyberpunk 2077, like investing, time rewards the patience ;)

AK71 said...

Hi VT,

Yes, I like to think that patience will be rewarded. :)

WTK said...

Hi AK,

I think that it does not matter whether the share price is going. This is applicable for those who invest the fund into the market for generated dividend, on the monthly basis. One can buy more share when the price goes down.

As for the perceived percent in cash, I think that it is always good to have some fund in cash . The percent differs from different people and should be in accordance to the individual's appetite and buffer comfort.


AK71 said...

Hi Ben,

I cannot predict but I can certainly prepare. ;)

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