Tuesday, June 2, 2015

Pacing Your Buying Activities

We've had a couple of consecutive negative returns in the Singapore market in recent times now given the lacklustre start to the year. 

It feels weird because on one hand it seems like a pretty normal things that we know the market will react but yet on the other hand because we have not had such negative returns for a very long time, thus a small minor correction in the market makes investors feel pumped up and jittery about it. Already, I've seen a few investors getting hands itchy these few days, getting into plenty of buying activities to each of his own. 

Telcos down, banks down, Oil & Gas down. So many opportunities, yet too little funds to allocate. This is what we've been hearing on the side these days.

Perhaps, it is during this time that we should remind one another of the virtue of patience when it comes to buying. Kiplinger called this the general rule to remind investors to never allow yourself to be bullied and tricked by your own emotions into buying something that “can’t wait”. The fact is most things can wait and there isn’t the last train that is going down the track. Even if you had found a stock proven to be in a great position to buy, pace your fund allocation into buying these stocks such that when things get uglier, you would still have the funds to take advantage of them. 

For instance, during the global financial crisis in 2008 / 2009, there are plenty of low hanging fruits awaiting for investors to purchase them. These stocks belong to the category where they are strong fundamentally but yet are trading at a very attractive valuation. However, due to market fear at that point in time, there are few investors who are willing to stash their hard earned money into the market, choosing to sit and wait instead. For others, they probably do not have enough cash left to take advantage of the situation.

Buying at the bottom or selling at the high is near impossible task for most investors out there. The hard truth is most of the buying and selling activities would range from within the standard deviation and it can be quite hurtful to see your stock goes up higher when you have sold or lower when you have bought. Even the best fundamental stocks out there could succumb to market decision when the economy gets rough and market will misprice itself. This is why pacing your fund allocations and activities is an important factor that every retail investors should consider. 

For an opportunity loss it may seem difficult to endure, a permanent loss of capital is harder to absorb. With that, I will leave you one of the past record showing a few of these blue chip and Reits stock and how their market valuation at that point in time. The situation might be totally different from what it is today, but a food for thought all investors out there.


  1. Do you consider buying nam lee, 7% of your portfolio, in one go is "paced buying"?

    1. Hi Anonymous

      Nam Lee was a conviction buy for me as I had calculated their margin of safety. For conviction buys, I don't usually try to come in many different phases, perhaps 3 stages so if Nam Lee drops to a very attractive level, then yes I would add another 7% into it.

  2. when a trend forms, it intends to go until last mile. Investor tends to place greater importance to the recent prices, anchoring behavior. For example, if sembcorp is trading abv 5 for months, if suddenly drop to 4.5, seems very cheap. But it can go down to 3 who knows. the longer of the horizontal range, the higher the vertical up or down.

    1. Hi Richard

      Agree with you, which is why the 52 weeks low always look attractive to investors :)

  3. Hi B,

    Thanks for sharing.

    Mind to share what is your investment strategy during the volatile period? When you'd trigger your warchest and how would you pacing yourself to prevent falling into continuous deep downtrend.


    1. Hi See Kay

      I'd probably go in batches while keeping the cash allocation up there. This can come in the form of incoming fresh funds or dividend payments received. As long as I am comfortable with the price I am buying, I am fine holding them while they are going down further, while making sure I have the funds to buy them even more if that's the case.

    2. Thanks for reply, B!

      Indeed that's a good strategy, release your warchest in phases so that you won't get caught and also to averaging down your losses if price goes down further. :-)

  4. Hi B,

    Very timely post for me. I've just been tweaking my investment plan to help me avoid getting too overexcited too early when stocks get just a little cheaper. I'm giving myself 3 month 'blackout periods' where I need to wait to make new investments, to avoid getting impatient and loading up on new investments too quickly, when in fact stock prices might keep falling for months and months. Hopefully it helps avoid the feeling of trying to 'time' the market too.



    1. Hi Jason

      I managed to see your latest post on how you are trying to go for more passive rather than active investing. Could turn out to be a very good decision there, more activities certainly doesnt mean higher returns.