Sunday 8 October 2017

Correction

Definition of correction is when the stock price falls 10% from the peak price. Correction usually occurs at least once a year. So far in 2017, I have not experienced a correction or maybe I missed it. 

Nobody can predict with consistency whether a market will rise or fall. The stock market rises over time despite temporary set back. Despite a major drop in a share price correction, one still can emerge with high returns as the share price generally rise higher over time due to inflation. For example, your mixed vegetable rice has increased from S$2.50 in 2015 to $3.30 in 2017. Say a listed company called Ah Boy Vege Rice will record higher revenue from 2015 to 2017 and share price will hit a higher price.

Historically, bear markets will happen every 3-5 years. I am still waiting earnestly for Mr Bear to come by keeping cash. Cash is the lousiest return asset class. Please come fast as I want to deploy my cash. Like all seasons, winter will eventually turn to spring. Bear Market will turn Bull Market. Everything has a cycle.

The greatest danger for an investor is to be completely out of the market. I will always remain invested.

A few reasons why I prefer USA companies.

1) High market cap will reduce market manipulation
2) High volume and high liquidity
3) Market with most research and news coverage
4) US has the most successful global companies
5) Key mover for stock markets
6) Good transparency for companies' corporate governance  

My personal investment strategy follows a pyramid style. The base consists of low risk investments with a diversified stocks in at least 10-15 blue chips companies, in the middle of the pyramid consists of 2-5 growth stocks and at the tip of the pyramid, I am using options trading to increase the return of stocks, high returns with short term trades and hedging purposes through bonds ETFs.

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