Earlier in the month, I wrote an article (here) about how I was going to utilize my funds in a bear downturn market scenarios. Since then, the market has somewhat presented me with an opportunity to add on some of the great counters at a rather attractive price which I excitedly add on into the portfolio. I’ll share some of these buys when I finish consolidating and start to write my October portfolio in a few weeks time.
For me, the strategy was simple.
I had a strategy in place to how I am going to approach the bear market and focus on it. I had earlier shared some of these strategies which are exclusively mine and could be different from any individuals (disclaimer) but the message was clear. Have a plan, sit back and enjoy the show.
In summary, I have appended my strategies as follows:
1.) Research on the companies in your watchlist way before hand.
2.) Focus on companies which exhibit strong earnings and balance sheet and are trading at attractive valuations.
3.) Ensure to phase out the purchase such that liquidity will not remain an issue.
4.) Continue to monitor on personal incoming cashflow (monthly salary/bonus/dividends) for additional liquidity buffer.
The Psychological Problem of Waiting
For some reason, there are always a group of people who are going to wait for a better entry price and play the waiting game. I have no issue if that person has a plan in mind or perhaps are waiting for an even better valuations but for most of the cases these are usually not the case.
The problem of sitting in cash and just waiting for a “better” entry is really about the psychological mind games that isn’t going to work out well for the investors. We are not assuming a full binary decision of all-in versus all-out in this instance but the problem with mindless waiting is that you as investors are never going to be comfortable in the market for as long as the market rises or falls.
Every investors are looking for an opportunity of a market correction so that they can purchase the stock at a cheaper price for the same valuation. But when the market does go down, it usually tempt the investor to change his strategy by shifting the goal post further and further away from the reality. The longer this plays out, the harder it is for the investors to make a decision to enter the market. This happens a lot that when stocks fall, people think that they might as well wait because stocks are going to get cheaper the next day.
When we were at the peak of the market not too far away from today the past couple of months, it is easy to look back on the depth of the market crisis and think how we are going to deploy the strategies when opportunities arise. However, when we come to real time, everyone realises it isn’t an easy decision and history would prove again that people will chase after stocks only when it moves up and trading at higher valuation.
What about you? Are you one of those who finds it difficult psychologically in the market?