Friday, July 10, 2015

The million dollar question: Is a crash coming?

Cash deployment table


What do we do when there is a crash? I still remember the last crash in 2009. I just entered the work force for about 2.5 years, and half a year before the crash happened, I had already locked my money up in SPH, Singtel share. My financial adviser had also urged me to take out the existing 10k i had in my CPF OA to invest, when I asked him about the risks since OA was already giving 2.5%, his retort was that funds easily could give 10% yoy. Fast forward today, I sold my singtel shares only 2 years ago after being tired of waiting it out at $3. It is a profit if you take into account the dividends. My SPH shares are still giving me dividends but are still in the red in terms of capital investment. My unit trusts? Still 30% loss.

What lessons did i learn from that crash?
1. Having a warchest. It empowers you emotionally as well. I had zilch. just changed jobs. even after 6 months of saving and having an extra 2k, i refused to put that money in the stock market.
2. Timing. I recall lamenting to my other half that DBS was now at 8SGD. But we never put our money in DBS. With the market bleeding, it just seemed possible for even this 8SGD share to bleed away. The above table would certainly be helpful to combat this.
3. Research. I should have done my research before hand so i knew what shares i wanted to buy and what price is fair amount to pay for them. This is also related to the second point on timing. If you know that is a fair value to pay for the shares, you would be more sure of the timing to purchase. In times of trouble, its always good to have on hand companies which are cash rich, like 1) SIA (3.8B net cash) 2) Genting (3.56B), 3) SGX (867m), 4) ST Eng (725m) and 5) Dairy Farm (629m)

Do I think a crash is coming?
On one hand, i haven't heard the same confident tone that my financial adviser used when he told me to put all my money in unit trust. On the other hand, i have been hearing some friends who never used to be keen on the share market dipping in their toes. There is also the issues of the trouble Grexit, China stock market rout, MERS etc. You never know when a crash will come, the only thing you can do is be prepared.

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