The best time to enter the stock market is now
This is not original, I spotted this statement off a Friend’s Facebook post, celebrating how the ‘Great Singapore Sale’ is here. Well, a sale is indeed here, and it’s not limited to the boundaries of Singapore.
Call me a wayward investor, but I liken my investing strategies to that of shopping. On a typical day, I’d be reluctant to buy a piece from my favourite stores, no matter how much I like it. (Zara pricing in Singapore is at least a 20% markup, compared to the prices in Spain). But at a sale, I’ll buy 3-4 pieces each time.
I admit I lack the physical or mental discipline to engage in dollar-cost averaging. My primary focus is whether the stock is at its lowest in history, with the strong possibility of rising in the future. (I considered putting down ‘near future’ but with the current circumstance…)
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The stock market rout recently caused much anxiety among existing investors. (If you’ve just entered the market, lucky you.) In fact, I should be facing that sort of anxiety as a majority of my investments are rolling in the red.
A friend once pointed out that the economy moves in 7-year cycles. Back then, I didn’t quite believe her, but today, I realise that statement is as true as it gets. The last time the stock market dived this much, was in 2008 when the US subprime crisis occurred, Lehman Brothers collapsed and retirees lost a large part of their savings.
I was still in school back then, sheltered from the volatility of markets, bogged down by an impending university loan which I had to pay for the moment I graduated. In such circumstances, investing was far from my mind.
Today, I have a regular income without substantial loans to cover. With the right ammunition and some energy bars to wait this out, I’m in hope that my portfolio will be in the pink of health soon.
Buying in smaller lots
In fact, I’m particularly fortunate that SGX’s move to allow investors to purchase a minimum of 100 shares per lot has kicked in. I’ve been increasing my holdings in particular stocks, and that has helped to decrease the average cost of the shares I’ve purchased, reducing my losses in percentage terms. Buying smaller lots incurs a greater brokerage fee, but that has armed me with the option of taking advantage of even lower prices should that occur.
The question of when?
I admit that I’m not an expert of when to enter the market. On Tuesday last week, I purchased DBS shares at $15.92. Several hours later, it fell to $15.88. On Friday, it closed at $15.72. It’s not a worry for me in the grander scheme of things, given the small lots I purchased.
Essentially, I view the current volatile period as a good time to buy in. Many blue chip firms are trading close to 52-week lows, and the STI is at its lowest since 2013.
As for the precise moment to buy in, I base my judgement on the following factors:
- I’d keep track of a selected few companies with a strong fundamentals and good prospects.
- Given the price from the last one year or even, 2 – 3 years, I’ll do a sensing of the price which presents the best value vs risk. Reuters provides useful options to compare it with moving averages, etc.
- Movements of global markets – Even though I trade only on STI, how well global markets do is instrumental to the stock prices in Singapore. It is essential to know how the US market has fared the night before, how Europe has closed and more importantly in recent times, how the China market has performed. Knowing when key economic data of related countries will be released is also key in timing your purchase.
- Compare price movements to that of the industry. Is this stock falling because of weakening prospects, or because of volatility in the industry and broader economic conditions? If it’s the latter, buying in may prove to be a wise decision.
In these uncertain days, a good judgement is even more essential. I just hope my emotions will not get the better of me. As with most things in life, there are decisions made in the past which cannot be changed. But there is no room for regrets. What we can do is to try and make things better, with the current assets left on hand.
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For the readers of my previous post, I may have been proven wrong. Sembcorp Marine is languishing at $1.63/share. I’m still holding on.
Do you think that it’s a good time to buy in? Do share your thoughts in the comments section below.