This year has indeed proven to be a volatile year for the equities market. Solid opportunities for traders but terribly uncomfortable for investors. If you’re not sure what to do in a bear market, you can recap here:
However, one shouldn’t feel uncomfortable, even for an investor. Here’s why:
1) This year will probably be the year for you to pick your favourite stocks / funds with a high margin of safety, not once, but at least twice when the market falls sharply.
2) Don’t forget that it is extremely difficult to time the bottom, therefore, try to spread out your purchases. You’ll feel less crazy once you actually practice averaging. For example, you could split your warchest into 3 parts and only activate them when you sense extreme fear in the market.
How do we know if there’s extreme fear? When there’s an extreme discount! Each level of say, about 10-15% discount of the stock price, you could nibble a couple of lots of that stock you have been eyeing.
3) Speak to your trusted broker, investment specialist because you probably need a second opinion anyway. Who better to ask than someone facing the market 24/7, right?
4) Prepare your warchest and save your dollars. It’s not the time to go Y.O.L.O.
5) Prepare an additional savings account for your dividends or capital gains. This account can help you better track your investment proceeds.
For more strategies in investing which apply to both funds and equities
Where we left off. . .
If you’ve missed the previous article on the STI and my short term forecast
I believe we still are on the same page from where we left off. However, judging by the STI movements since Chinese New Year, I’d like to make some slight changes to the trajectory.
We are likely to see some selling pressure the next couple of weeks due to profit taking followed by a reversion to the mean via linear regression (seen in the chart above).
As we are still into the middle of the earnings season, this may lend some strength to the local market as the performance of last quarter unfolds. I believe most sectors would see decreased earnings VS those in the defensive sectors.
For details on the support and resistance, you can refer to the chart.
I would expect a strong sell-down in the period between May and June which will then mark the extreme fear which will bring the STI index down below 2500.
This coincidentally will fall in line with the 2016 Great Singapore Sale. Ladies and gents, we all love a GREAT sale don’t we? 😉
This presents a very opportune time for you to grab your favourite blue chip stocks or even start dollar-cost averaging on the index via the STI ETF (SPDR STI ETF).
Here’s how you could average in the STI ETF:
Every 200 point drop in the index represents an opportunity. So once the the 2500 is breached, you could then average in at these levels 2300 / 2100 / 1900 (to be taken with a pinch of salt).
Well hope this helps with the STI index. Meanwhile, keep saving.