Tuesday, August 19, 2008

Slow and steady now

Bloodbath. That would how many would describe the market. Few would expect the market to drop so quickly in a span of 2 weeks. Well, it is happening now. STI has breached the 2746 level and at a new low since Nov 2006.

For investors still holding on to cash, do not give the market a miss entirely. There are excellent blue chips out there at attractive valuations and dividend yields.

Invest in different market low points if you are not sure where the bottom is. Do not be afraid to sit on paper losses.

For me, I bought DBS @ $18.44 yesterday for its dividends. Though I am aware it will drop more than $0.20 after XD, I still couldn’t resist the lure of its dividend yield! True enough, it went to as low as $17.90 today.

The consolation is that I have locked in $200 dividends for Sept. Though it is too late to have regrets!

I have already contra my SPC for another modest $150 or so gain.

If the market dips even more tomorrow, I will pick up more blue chips and wait for a technical rebound. If not, I will also be happy to keep it for dividends and long term capital appreciation.

SGX and Capitaland will be on my radar tomorrow.

4 comments:

Anonymous said...

Would you consider to buy since it has gone down now? For you, you prefer to buy individual stock. As for novice investor like me, I should take up this for the time being?

Sgbluechip said...

I will wait a little longer, since the bear market is probably only 1/2 way through.

There is no expert investors. Everybody is a novice. Expert investors means 100% means he/she will never make investment mistakes. This is unlikely.

You should read up more investment books and find a investment style suitable for you...

musicwhiz said...

Hi sgbluechip,

Just my comments:-

1) We will never know when the bear market will run its course. It is only on hindsight that people will say "oh yes it looked so obvious at the time". Don't trust what newspapers say about the bear market being half-way through. They have no idea themselves and are just trying to be fortune-tellers.

2) We should purchase when we see value, and not by assessing the stage of a bull or bear market. Value is something which an investor should independently assess, and not let the talking heads lull us into thinking something has value when all they offer is interested advice. Thinking independently is very important.

3) I think the definition of expert investor is not one who is 100% correct. No one (not even Warren Buffett) gets it right 100% of the time. In fact, a seasoned investor is one who will recognize mistakes and learn from them, in order to become a better investor. It's the ability to learn from mistakes and grow which makes one an "expert", not the ability to avoid mistakes 100%.

Cheers,
Musicwhiz

Sgbluechip said...

Hi MW, thanks for your comments. Just to some thoughts to your points as well:

1) The point on bear market being 1/2 way through is actually my guess, based on historical statistics. Most bear market last around 2 years or slightly longer anyway. Hence, I conveniently came out with the "1/2 way through" term. I might be wrong, it might only be 1/4 through though!

Furthermore, Singapore (Asia) stocks are usually prop up by foreign investments and instututions. Hence, relying entirely on fundamental analysis might not yield better results than predicting when the bear market would end. Essentially, we have to draw the cue from US and European markets. A good value stock also needs a lot of investors before it can shine right?

2) During a contractionary phase of the economy where consumption is reduced as people get retrenched or hold on to more cash, companies will report lower earnings and dividends. Hence stock prices will be battered down, sometimes overly sold to a point where investors see value to pick it up and wait it out while riding the next cycle of the expansionary phase. I feel that when we assess a company, we should also read the stage of the economy it is operating in before investing as well. All companies are inter-related and subjected to different extend of market risks.

3) Agree totally on this point.

Cheers!

Sgbluechip