Time to create portfolio of equities – 2008

During past weeks, nervousness creeps back into major stock markets, from US to Hong Kong and Singapore. Dow Jones Industrial Average, Hang Seng Index and Straits Times Index have fallen on fear of sky-high oil prices. Inflation is now the main focus of major economies instead of slowing economic growth.

 

As saying goes, cash is king during this climate. Existing holders of shares are off-loading their shares and reduce their holdings of shares for various reasons. If you have ready cash and have the holding power for a longer period, it is a strategy to pick up some blue chip companies during dips in the STI index. This strategy is not speculative since you will be holding these shares for at least 1 year.

 

As the Minister for Finance had said recently, “Singapore is not in recession”. Some blue chip companies are managed by capable CEOs and they have proven track records to survive downturns in the economy. Only good CEOs surface during a slow-growth environment. It is harder for CEO to perform during downturn than economic boom situation. So, one selection criterion in picking blue chip companies is the reputation of CEOs.

 

Assuming if you have set aside $100,000 to invest in equities as a portfolio, you should have done some research into various blue chip companies and selected 15 share counters you will be watching. You would have decided to buy into these shares at target prices that you are comfortable and low enough considering 52-week high and 52-week low share prices of these blue chip companies.

 

Buy only when share price drops to your target buy price. Do not be tempted to buy at prices higher than target prices. This call for patience and it will be alright if you do not get the counter now. There can be other time during the rest of year to pick them up. Otherwise, leave the stocks alone because they will be overvalued by your selection criteria.

 

Written on 6/13/2008 9:03 PM

 

Copyright © 2008, the author known as LKT in Singapore.

 

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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