It seems like Singaporeans are pretty keen to invest again.
Everybody is now back in the stock market and even the uncles and aunties are shouting BUY BUY BUY! (okay, maybe in another month or two)
Is there cause for panic?
The markets have recovered very well in the recent rally and while there seems to be room for more upside, investors will not be able to get the gains like 2009.
We need to be very SELECTIVE in our stock picking for 2010 in order to make money.
Remember: When everyone is BUYING, it is the best time to SELL. Whenever people are SELLING (2008 and 2009), it is the best time to BUY.
STI is hitting its new 52 week highs and I am quite positive that the market will at least trend up further for this coming quarter.
One must however watch his basket closely as 2010 could prove to be another year which will give us BIG surprises.
The eurozone has unemployment figures that are simply staggering (around 10%) and close to 20% in Spain.
Of course, unemployment rate usually lags behind when an economy starts to recover. But only time will tell.
I hope to write on some potential bubbles that can hit us for the year 2010. Maybe when I find the time to do so =)
Now I am just watching my basket closely and liquidating when the price is right.
FF,
ReplyDeleteDo remember that the market can stay irrational far longer than you can stay solvent. I'm also holding the idea that it's time to be cautious. My own indicator is the NLB's financial books section. During the bad months, really full shelves of books for me to read. Recently, less and less books there.
Signs of good times isn't it?
Personally, I'm cashing in some of my positions to hold my cash.
I'm just wondering though - if one liquidates at much higher valuations, then one has to buy back at such high valuations as well. Won't this reduce the margin of safety one may already have? Unless one intends to wait all the way till the next bear market for valuations to be attractive again.....
ReplyDeleteIf the market continues to trend up, you either buy high and sell higher; or take a long break from the market and wait for STI to fall below 2,000. Can you?
ReplyDeleteIn my opinion, now is the time to stay out of the market.
ReplyDeletemomoeagle (wealthbuch) here using another comp...
ReplyDeleteMW, my thinking is that you buy when you have a margin of safety, why not sell when you have a high margin of (unsafety) when taking into account the opposite direction?
i.e. when it is overvalued?
That is the paradox of value investing, they don't know what is called over-valued and they won't sell at their own will. They need extra ordinary events to drive them to sell angrily.
ReplyDeleteHi 8888, if it was so easy to determine "under-valuation" and "over-valuation", then everyone would be sitting rich by now. No one would need to do so much homework to ensure one invests properly. I dare say most of the rewards from value investing come from dividends.
ReplyDeleteHi MW,
ReplyDeleteI agree. 3 people doing a FA on a company could come up with different ideas of its fair value depending on methods as well as expectations or experience. I also agree that steady dividends is an important part of value investing. I'm trying to increase my passive income stream by going for high yields which have passed my FA.
Hi Createwealth,
I guess most people have not gained mastery over their feelings of greed and fear. I don't think I'm there yet either.
Actually, the definition of Value Investing is Buy when there's a margin of safety but sell when it's over-valued. Which means everyone must have his own judgement call of the company's intrinsic value.
ReplyDeleteGraham & Dodd defines it as such. Buffett does it frequently and laments the times when he didn't.
If want knows that the price of a certain stock has a 80% chance of coming down, it might make sense to lock in profits first and buy the stock again when it comes down.
ReplyDeleteOf course, there is a chance that the stock price will continue to rise and then we are left with no choice but to look at all the "profits" that we lost out on.
Whatever the scenario, the most important thing in investing is not buying but SELLING.
We need to know when to SELL.
We are so well versed in buying that we have forgotten that stocks at the end of the day won't give us food, bring us on a holiday or anything. (Well, unless you are talking about the AGMs that you get to attend and the buffet lunches).
The most important thing is the journey i guess...
If I want to make 20% returns, and the stock gives me 20% returns, it might be a good time to sell because I have already hit my objective.
I admit that I am very quick to buy stocks but very slow to sell them. Always end up falling in love with my stocks.
FF, If you have bought a good stock and it is rising, why sell at 20%?
ReplyDeleteIt is better to employ the trailing cut loss to take you out :)
Hi FF,
ReplyDeleteI did sell out of Ezra and Swiber due to their Balance Sheet deteriorating, but they have since registered much higher market prices as compared with my divestment price. But no regrets as my system tells me to sell when the fundamentals have changed for the worse, thus it would seem Ezra and Swiber were (in my opinion) fairly valued.
Therefore, it is advisable to have a system which you yourself are comfortable with to determine buying and selling. No one can dictate this for you.
The best time to make money is when every one else is loosing their nerve - good luck
ReplyDeleteYup, everybody needs their own trading system and the end decision lies with them.
ReplyDeleteSJP,
Care to explain what you mean by when everyone is losing their nerve? You mean as during a market crash?
If a stock hits my earnings goal, I will sell.
ReplyDeleteI don't really have time to monitor the market and set trailing stop losses.
Prefer to just lock in my gains and call it a day.