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Does AK have anything uplifting to say as stocks bleed?

Wednesday, August 19, 2015

Feeling the pain from the market downturn?

Hi AK,

Its Painful for many over last week.
Myself included.

I m 50% in reits/trust & the rest in others. The others are all doing quite badly.

Following your blog since 2009...

I understand you did very well positioning your strategy buys during the period between 2009 thru mid 2014...

What's your take on current situation & appreciate your view on the best way to ride thru this period?

Possible to share your personal strategy & focus stocks?

Appreciate some emotional uplift for the fallen :)

Sent from my iPhone

There is no need to be afraid of the dark. Switch on the light.

Hi T,

I am actually selectively buying on weakness. If you follow my blog and the comments section, you will see me talking about these. Or if you follow me on FB, you will see this too. :)

If we have invested prudently, we shouldn't worry about volatility in prices too much. In fact, if we have an idea of what constitute fair values, we should be prepared to buy on further weakness. ;)

This downturn in the stock market is no different from any other downturns in the past. You will see some of my older blog posts in the past which talked about downturns and how I reacted, for examples, at the tail end of the Global Financial Crisis when I first started my blog, during the Fiscal Cliff worry or the Taper Tantrum. You will find these in the right side bar of my blog.

At all times, have a plan and as long as it is a sound plan, stick to it. :)

For immediate relief, you might want to read this blog post:

"How to have peace of mind as an investor."

Gambatte! ;)

Best wishes,

Related posts:
1. How do I view the plunge? (from Jan 2014)
"What we have control over is to ensure that our investments are fundamentally sound and that they will continue to do what we expect them to do. Since I am primarily invested for income, with a shopping list in hand now, I am quite happy to be paid while I wait."
2. Rules for investing in difficult times.
3. Feeling depressed about paper losses?


KC said...

Invest with money which you are prepared to write off. Not money meant for milk powder and home loans.

imdna said...

More like invest with money you don't need for the next 5 years....who has money they are prepared to write off srsly...maybe only AK level people.

Cory said...

If we go in with the mind set it will be written off , it probably will be. I would say invest in something that has so much value over the price and that you have high confidence it will be realised in a matter of realistic time.

KC said...

Cory...simi investment so bao jiak? I also want :P

Shen said...

Dear Ak,

May I kindly ask for your opinion on REITS esp those in emerging markets w currency risks ? Will currency hedges in place be sufficient to maintain their DPUs?

REITS such as lippo with currency risks have been bleeding these days..:/

AK71 said...

Hi Shen,

I think REITs are relevant instruments for income investors.

If you are asking me about what will happen in the future, I don't know. I do, however, have an inkling as to what might happen if certain things were to happen. ;)

As for REITs like Lippo Malls, I have been wary and advising caution for a while now both online and during my talks or chit chat sessions with readers. DPU is probably just one of the things you would have to worry about. You might want to read this blog post if you have not done so already: LMIR: Gearing ratio and margin of safety.

Unknown said...

Hi AK,

Do you think its a good time to buy Accordia Golf Trust? Will you be adding?

AK71 said...

Hi Adrian,

It is the same as asking if the price is good and the answer to this will be different from person to person. So, is it a good price for you? You have to ask yourself. ;)

Would I be adding to my long position? Since I already have a significant long position, I would only consider doing this if its unit price should have another meaningful decline.

JB said...

Hi Ak,

Could you share more about the concept of position sizing? Supposely, you have plan to invest in a stock say $10k, how to position size since erratic market can go lower; by the second buy we can become doubtful and 'scare' if the price go even lower. Hope to hear from your sharing. Thank you. :)

AK71 said...

Hi Jingle Bell,

This is where I direct you to my blog's "Search" function which you will find at the top right section of my blog.

Search "position sizing" and you will see 8 blog posts listed. ;)

OK, if you know the value of something and if Mr. Market were to sell it to you at a discount, why would you be scared if it becomes cheaper? You should be happy. Sensible position sizing will ensure that you would be able to buy at lower prices if they happen. :)

Having said this, there is no hard and fast rule about what is "correct" position sizing. So, if two persons have $10K to start with and person A decided to carve it up into 4 portions of $2.5K each and person B decided to carve it up into 5 portions of $2K each, it simply means that person B can stay in the game longer if the bear market gets progressively worse. It is how conservative we are and what our beliefs are.

Also, position sizing is not only important when we talk about prices, it is also important in what we expect an investment to do for us. So, how big a position should an investment have in our portfolio? It would depend on our motivations as investors. Remember the pyramid? ;)

OK, this comment has become much longer than I thought it should be. ;p

JB said...

Hi AK,
Yes, I did the search for position sizing on your blog previously but I didn't seem to understand so pardon me for asking and hoping to learn abit more from you. :) Just like to clarify, if we primarily investing for income, by carving our $10k into 2 portions, (as we might never know how soon the market rebound) should it be $5k n $5k , or $3k n $7k ? Is 2 portions too aggressive to start with? Good to hear from you. :)

AK71 said...

Hi Jingle Bell,

It depends on how aggressive or conservative the individual is and it also depends on what he or she believes in. There is no standard answer for this.

I might believe that the market has bottomed and decide to put in $7K, holding $3K in case I am wrong. I might believe that it is just the beginning of a bear market and decide to put in $3K and hold $7K. I might decide to be equivocal and put in $5K, holding $5K.

If we are primarily investing for income, a more pertinent question to ask is how much should we set aside to invest in income producing stocks? I just had a conversation with a friend on this and I said that we should not have more than 30% of our portfolio in growth and more speculative stocks (i.e. those that do not pay dividends or pay poor dividends).

Generally, however, for someone who is a 100% income investor and who would like to keep things simple, then, splitting up the $10K (which must not be money he could ill afford to lose) into, maybe, 4 equal portions and parting with 1 portion each time there is a 10% or 15% correction in price sounds OK intuitively. Remember, there is nothing sacred about this.

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