Panic selling 09 March 2020

Today is the STI's worst trading day since Oct 2008, where investors/traders rushed to sell everything. The catalyst? Oil rout and covid-19 fears! The STI is technically into bear market. It was literally a sea of red in the equity markets today.

It is in times like this, if you did your homework, you choose the right stocks and have the nerve to buy some, fortunes could be made when eventually the stocks turn around and turn north. If you want to do well, stay stoic and adhere to your investment principles and plan. So...what's on your watch-list (shopping list)? 

Crash course in investing for a friend

My friend wanted to start investing which I welcomed and decided to share the following with him (in no particular order);

# Only buy shares of companies that you can hold indefinitely and later sell for a profit at the time of your choosing, rather than because you 'need to'. Put another way, don't invest capital you cannot afford to lose. Markets move up and down so you don't want to be in the position of needing to sell while share prices are depressed. We want to buy low and sell high, taking advantage of market gyrations, and we need the time and patience!

# Your core holdings need to be companies with a minimum 1Billion market cap and pay dividends of at least 4% so you can get paid while holding (especially if you get stuck in a down cycle). The PE ratio should ideally be below or not deviate too much on the higher side from the PE ratio of the STI index (currently ~12). An 'undervalued' company is one where the price to book ratio is below 1.

# In the market, you have the psychology- fear and greed. To simplify, when people are fearful, they sell (which drives the price down), and when people are greedy, they buy (drives price up). This may be easier said then done, but to be successful, one must buy when the market is overly fearful/pessimistic, and one must sell when the market is overly greedy/euphoric. Just think, wouldn't you much rather buy your BMW car if it had a 50% discount!? Hence, throughout history, the best times to buy shares in good companies were in times of crisis or a semi crisis. It is impossible to time the low, but you can accumulate using dollar-cost averaging strategy during the down cycle. In short, it is buying in tranches through time to average the cost price of the shares in the company you bought.

Currently, using the stock screener on the SGX website, the following companies fit the criteria above;

Date: 06Sep2019

Would I immediately go out and buy all the companies above? No. But it would be on my watchlist and when valuations become extremely attractive (market corrections/crash), I'd look to add to my portfolio indeed!

Legal Disclaimer: This is not an investment/trading advice or recommendation. The above content is for informational purposes only. Please seek the opinion of an expert or do your own research before making any investment decision or action.

How to do I prevent disappointment, frustration or anger?

I struggled with this throughout my whole life, both in my personal and professional realm. The main reason is because I upheld a high standard and expectation in my relationships with people, be it with family, friends, colleagues, professional advisors, contractors and so on. Whenever, they did not meet my expectations, I took a very black and white approach, which was to totally disconnect from them (except for family) while holding on the baggage of disappointment, frustration or anger. Between my late 20s until now, I believe that I improved significantly in this facet of my life. I essentially adopted a new approach as outlined below;

-Give people 20% buffer (to make error, mistake, time allowance), as they may not meet your expectation all the time, much less exceed it-

You see, the thing is, all people have their own stress and challenges in life. This is to say, we're not always at our best version of ourselves. Being aware of this, I believe it is important to factor this in or account for it when dealing with people. As long as they are effective, responsible, and accountable 80% of the time- this is satisfactory. Nobody is perfect, and just as people have shown grace when I may not be at my best, I too need to be graceful back to others. This approach has proven to make my life filled with more happiness rather than filled with burdens and stress.

High on life

Richard Branson, the well-known billionaire of Virgin group, said something to the effect, "You either stick your neck out and do something and have an amazing life, or sit on the sofa and watch other people do it".

We all should reflect on this, if haven't done so already. If you are 20 years old, you'll be 30years old before you know it (in what may seem like a blink of an eye), and then 40 years old, 50 years old and so on. Every single day counts and if we aren't choosing every day to do something amazing and choosing to be high on life, we just may be full of regrets when the inevitable final day arrives.

 

Philosophy and Wealth

"Of course I do not forbid you to possess it [wealth], but I would have you reach the point at which you possess it dauntlessly; this can be accomplished only by persuading yourself that you can live happily without it as well as with it, and by regarding riches always as likely to elude you." Letters by Seneca (Stoic Master)

Recommended books on Stoicism

Perhaps you're wondering where to start. To know more about the Stoics, A Guide to the Good Life: The Art of Stoic Joy, by William B. Irvine, is a terrific introduction to the basic ideas and how they could be applied to daily life. To further your learning, read Seneca's Dialogues and Essays, Marcus Aurelius's Meditations, and Epictetus's Enchiridion.

HITTING BACK THE CURVE BALLS

We have all heard sayings like “Life will throw you a curve ball once in a while”, and, “When it rains, it pours”. 

Read the blog post Mindset for Success: HITTING BACK THE CURVE BALLS, from setyourselfuptowin.blogspot.com to find out 3 ways to stay motivated.