The Straits Times Index (STI) declined 5.19% in a single day to reach a new 52-week low of 1,821.13. Since the beginning of this year, the index has fallen 47%. This would mean that your portfolio of Singapore equities could have been halved by today. The STI consists of 30 large capitalised stocks on the Singapore stock exchange and they could not avoid the fate of poor economic climate sweeping the world’s major economies.
If investors were planning to bottom-fish stocks at their lows will be sorely disappointed if they had acted earlier before today. Prices of stocks moved even lower after they had paid what they thought were low enough prices. In another word, you cannot time the market and no one dare to say when the bottom will be reached. Is STI of 1,800 the next psychological floor? When the nation is staring at technical recession and longer period before recovery, it is not possible to say when the stocks will stop falling and reverse course.
The amount of bad financial and economic news was depressing. The lay-off of finance sector employees started to hurt morale of Singapore workers. Tracking of daily stock movements can stress out investors.
If you have not invested in equities, then it may be wise not to buy in a big way. The volatility of stock markets will continue for a while to come. If you have built up a portfolio of equities over time, you may not want to track your stocks on a daily basis. The wild stock movements may cause you to doubt the value of your portfolio and sell out at huge losses.
Do not regret your past decisions. What is done is past and cannot be undone. You should not be tempted to increase your original portfolio size just because you think the stocks are “cheap”. The risk is that you may be over-weighted in equity investments beyond what you can afford. Once you have drawn a line as to the portfolio size and no more stocks to purchase, you will be amazed how relieved you are. You can go on with your life without worries over stock prices.
Written on 10/22/2008 9:30 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.