Tuesday 18 August 2015

Having a Strong Stomach

As the STI reaches just below the 3050 mark today and nearing the 3000 level, I'm starting to learn the importance of having a strong stomach when investing in the stock market. Falling from its peak of above 3500 in April, the STI has fallen by more than 450 points, almost 13% since 4 months ago. I think its the deepest drop of the market since I've started investing.

(Image source: https://pixabay.com/en/business-graph-statistics-growth-163462/)

Most of the shares that I've invested in or am currently watching have dropped quite a fair bit in price (not as much as the market average though). It's not the best feeling to see the price of your holdings drop and I've thought about cutting losses for a few times already. But I've started realizing, I bought into the shares for reasons such as the quality of its earnings, its growth potential, etc. yet I'm planning to sell it simply because of the price. Yes, I can sell now and buy back cheaper later, but there's no guarantee that it will continue dropping and I'm not in a good position to time the market.

While I could've made more profits if I sold and bought back currently, nothing is said in stone. I invested more when the STI was hovering around the 3300-3350 range (which was in June and July). Did I lose money? Yes. Do I regret it? In a way yes. Would I have made the same decision? Almost every time. In my view, the shares that I was looking at seemed good value as they had dropped in price, predicting the drop in the Yuan and developments of the Greek debt crisis is next to impossible (at least for me) and I think they'll be likely to be properly valued in due course.

Now with oil prices dropping further and in the aftermath of the Yuan devaluation, the market may be even more volatile. While the prices of the shares that I hold have dropped, I think that I've bought them at a good value and will continue to hold them. Will this work out well enough? I guess only time will tell. But if things keep going downhill, I'll just learn to have a stronger stomach.

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