Josh Tan
The share markets ended lower today again. Sister A asked me again if it is time to invest. Truth is, even though I am an avid investor myself, I don’t know if markets have bottomed. Investing through the previous bear market in year 2009, I remembered selling off some shares at painful losses because it was getting unbearable. Back then, I did not have a mortgage to pay and a kid to bring up. This time round, I will be more cautious and these are 3 points to consider.

 

1) Invest but only when a plan has been done or research has been made
It takes time and passion to do thorough stock research. If you are also busy, at the very least set out a plan on how to invest. Carefully consider your investment approach. For example, if you decided on a long term regular investment plan that will average cost for you, now is the time to stick to it!
Quote from Warren Buffett: We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.

 

2) Invest but with money that is not needed

When you invest with amounts you won’t need, it is easier to be more patient for results. That has been my personal experience. Investments using CPFOA or SRS accounts do not affect your cashflow and can be invested. Do check article “Why you should invest your CPFOA”. Monthly budgets you have set aside for your retirement or saving or for children’s education are also great to invest with.

Quote from book “How to invest without losing sleep”: You will be more inclined to watch the stock prices with a fear of loss. This will put you in such an emotional roller coaster that you may become a slave to the market news and prices. Such behaviour causes investors to act irrationally.

 

 

3) Invest but take PARTIAL PROFITS later when there is a chance

Yes, I know that most recommend a “Buy and hold” strategy. Even Warren Buffett advocates it. I personally practice taking partial profits from portfolios and I believe it has actually helped me hold on to my investments better.

A few months back, I bought some Keppel Corp shares at an average of $6.83/share. When prices recovered to $7.23/share, I actually sold some away and kept only a smaller remaining invested amount. The profits made gave me a buffer against future paper losses. Alas, Keppel Corp has fallen to $5 today. By taking partial profits previously, I reduced my total invested amount and this has helped me prepare better if prices continue to tumble. However, avoid excessive buying and selling of shares as it can incur unnecessary trading costs and can be time-consuming.

In this CNN report, Warren Buffett said personally that he lost $2B on his IBM investment. Today, that paper loss has probably exacerbated. Everybody sees paper losses at some point, it’s just how you prepared for it.

Image credits: http://www.newindianexpress.com/business/news/Shanghai-Index-Dives-About-7-Percent-Other-Markets-Lower/2016/01/04/article3211103.ece

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Josh Tan is a member of the theastuteparent program. Read more about the program here

I have been providing investment advise since the global financial crisis of year 2008 where markets tumbled at breakneck speeds. Focusing on a dividend strategy (not just price) helped me personally stay the investment course and profit from eventual market upswings. Currently, many share markets are close to an all time high but there are definitely still opportunities with a WIDE RANGE of funds that you can buy to start building dividend income!

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