To stay invested or not?

Dow Jones Industrial Average Index was down 20 per cent since its October 2007 peak. It touched a low of 11,346 points last Friday on 27 June 2008. Blue-chip indexes in France, Germany and other European countries are down more than 20 per cent. Emerging markets in China and Vietnam have lost about half their value. (Source: The New York Times, as reported by The Straits Times, 29 June 2008)

 

So are we in Bear zone from now on?

 

Should we invest in shares now or should we wait for further price decline? A similar question is whether should we buy unit trusts that invest in equities? If you have invested, should you liquidate the unit trusts before the values fall further, or should you hold on until the prices pick up?

 

If you have diversified your investments into fixed incomes and equities you may find that your overall investment may gain a positive 1.5% even there are some sizeable losses in some of the funds. Diversification is the key if you want to continue to stay invested.

 

e.g.

Singapore Bond Funds                 – down 4.8%

Singapore Fixed Income Funds    – up 9.3%

SEA Equity Fund                           – down 7.9%

Singapore Money Market Fund   – up 8.3%

Asian Bond Fund                         – up 2.0%

Overall                                        – up 1.5%

 

One should also keep cash during these uncertain times. The reason is for dual purposes, firstly to use them during emergencies and, secondly to take advantage of low valued shares and buy into them.

 

Written on 6/29/2008 9:19 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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