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There isn't very much that I want to say tonight because I have probably said all that I want to say in my recent blog posts.
I just did some reading which is something I do every evening and came across an article by Aaron Task who is someone I enjoy watching on Tech Ticker.
Aaron shared 4 time honoured rules:
1. If you can't take the heat, get out!
This is something I did not talk about but I have said time and again that investors should just do what they feel comfortable with.
Anything we are not comfortable with, avoid.
Aaron is quite specific in who are the people who should get out.
2. Don't panic!
This one sounds very familiar.
Aaron says that many investors simply cannot take the pain and are cutting and running.
Historically speaking, many investors sell out of stocks at important market bottoms.
This is a reason why I refuse to sell when prices are forming new lows and would only sell if they rebound to test resistance.
Aaron is quite specific in who are the people who should not panic and should stay the course.
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| The 8 immortals each had his or her own way of crossing the sea. |
3. Have a plan!
Sounds familiar again.
Aaron says it differently from me but the essence of the message is the same.
We must understand our motivations for investing in the stocks we are invested in.
The tools we employ and the attitude we have must be appropriate to our motivations.
That way, we will stand a good chance of doing better with a consistent strategy and this is so both financially and emotionally!
4. Learn from your mistakes!
Do we need to say more about this?
Life is about learning and more learning.
Regular readers would know that I am still learning and would have read my story.
New readers might be interested in reading this:
Excuse me, are you an investor?
Aaron ends his article by asking us to ask ourselves three questions, go read his article and see how you would answer these three questions.
Could be revealing.
Enjoy "4 rules for the see-saw market".
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STI drops 0.9% to 2,796.22 at closing
Thursday, 11 August 2011
© 2011 - The Edge Singapore
Bloggy Award
21 comments:
I like your picture of the 8 immortals...
unfortunately i dislike having to cross choppy waters.
I much prefer to ride the cloud to travel 10 800 miles ha ha
Hi financialray,
High flier, I see. ;)
Let me guess, born in the Year of the Monkey? ;p
ha ha ha LOL
ya u r right, high flier but it is the pig.
the pig also can ride the cloud but alas, a little lazy and full of desires....
Hi financialray,
As a fellow pig, I fully empathise with you. Hahaha.. :)
Well, let us hope that our efforts in the stock market will send us to Cloud 9 in time. ;)
Sorry,
Should be 108 000 miles...chinese translation not so good.
Gut feeling is we will go down a few more roller coasters before we reach cloud 9..if we don't get shaken off by then, so having a distinct plan like your detailed outline is good to keep the focus
Hi financialray,
I was thinking that it should be "shi wan ba qian li" as well. haha.. ;)
I am really adamant about planning everything in my life. Those instances when I should be caught without a plan, I rather not remember. Planning reduces stress level in our lives. No two ways about it, I feel. :)
AK71,
Besides stocks, REITS, any other asset class would you recommend for a balanced position? During past 3 days of choppy market, my portfolio loss almost 27%. I am wondering if my position can be hedged if own bond? gold? or????
Hi Leo78,
There are 1001 things in this world we can invest in, perhaps more. ;)
Within the stock market, there are certain counters which are more volatile and some which are less. You might be interested in this blog post:
Roads to wealth creation in the stock market.
Now, if you are wondering about diversifying away from the stock market, you want to diversify away from paper investments. You want to invest in physical assets such as real estate and precious metals.
Some blog posts which might help you in your decision making process:
101 Investment Choices.
Conspiracy of the Rich.
Gold: To buy or not to buy?
Real value of gold.
I would not recommend or not recommend any asset class. You have to decide for yourself. Good luck. :)
I dont think I will see the worst bear market again until 30 years later. The last drop in 2007 is probably a once-in-a-lifetime event, and most people would have missed the rebound in 2009 and they want the market to go down now so that they can profit later.
Hi W.A.F.,
You could be right, of course.
I do not know for sure what will happen in the future. This, however, will not stop me from pre-empting events, of course. ;)
Good luck. :)
AK71
Thanks for your reply. Been waiting for days liao :P
Hi Leo78,
Apologies for the tardy reply. I was away for a short break. :)
Weekend cruise to Redang.
One reason this blog is popular is because AK gives sound advice.
It is not wise to tell anyone what to invest in. The individual has to take own responsibility when it comes to financial planning.
As for financial crises, there is a book in the library called "Joseph Cycle". Gist of it is that markets move in cycles and probably we see one financial crisis every 7 to 10 years, with perhaps smaller shocks in between, and sometimes aftershocks. If I had read and believed the book way back before 2006, I would be much richer by now.
Hi financialray,
Thank you for the vote of confidence. However, I have to say that I hardly give any advice in my blog. I simply share ideas. ;)
Hi AK
I'm reading your past blogs and am enjoying them very much.
Just to spur some discussions and thoughts from readers & yourself, for the sake of young investors out there, how do you decide the amount to put in for every trade (they called it 'position sizing').
With proper sizing, one can keep emotionally calm despite sufering from paper loss.
I googled to read about it (seemed more important for traders), but wonder if this is something everyone is conscious about and if this is equally important for buy & hold strategy.
CH
Hi CH,
I am glad you are enjoying my past blog posts. There are many blog posts which I have forgotten myself. :)
Position sizing? I must say that this is something I have never consciously thought of although I have heard of it many times before.
Personally, I go by gut feeling. This is why I am not a good candidate for writing on the subject.
If I do not feel very confident, I could put in as little as $6k into a counter. If I feel confident, I could put in 10 times more without hesitation. ;)
I shared this with a reader who is having sleepless nights because of the stock market in recent months.
This blog is almost 8 years old but still relevant.
Take a minute to ask yourself a few questions:
1.
Am I doing anything different today then I was doing before the market crashed in 2008…or 2000?
2.
How much volatility can I really stomach and how much money can I really afford to lose, even if just on paper, even if just temporarily? In other words, what is your risk tolerance?
3.
Can I really do this myself? If the answer is "no," then you're much better off finding a financial adviser. A good one can help you navigate the stock market's highs and lows; he or she won't promise you the moon, and the fees paid will be well worth your piece of mind and your bottom line.
In the end, the best advice anyone can give you is this:
Investor, know thyself…and proceed accordingly.
If You Can't Take the Heat, Get Out:
If the market is keeping you up at night, you shouldn't be in it.
This is particularly true for people at or near retirement age; you simply don't have the time (or income stream) to make up for big losses.
The same rule applies if you have funds in the stock market earmarked for a specific event in 5 years or less, like a house purchase, wedding or college tuition.
Contrary to what financial advisers tell you, there's no law stating your money has to be in the stock market, just as, contrary to what financial advisers tell you, there's no guarantee stocks will perform well "in the long run."
Don't Panic:
If you don't need the money in your retirement account in 5 years or less, you're better off sitting tight vs. cutting and running. Unfortunately, many investors simply can't take the pain and are doing just that.
Pulling out after a big decline means locking in those losses, a mistake many investors compound by turning around and buying assets that may already be at inflated prices.
That's why Wall Street pros refer to us as "the dumb money."
Have a Plan:
Sometimes the most boring advice is the best advice.
Learn from Your Mistakes:
A lot of investors were just waiting to get back to even after 2008 but hadn't changed their behavior.
Just as refusing to open statements from your broker doesn't count as "financial planning," neither does "hoping and praying" the market will come back.
Hi Ak,
I am one of the silent reader from your blog and I love your thought and comment (talking to yourself. I have mostly stay sideline during this period time, only come in the market in small fractions (5k shares) for 2 counters (1 bank and 1 bizreits) as I don't know when market will be at bottom. I will keep buying in small fractions for all shares that come within my TP range. I like your post "3 ask questions to yourself" and most importantly your comment on "Don't Panic, have a plan and learn from your mistakes".
Thank you for your sharing
FO
Hi FO,
Thanks for breaking silence and letting me know how my blog has been helpful.
I am so glad.
Good luck to us all. :)
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