We are into the first day of trading on the new year and what we get from the market was a blood pool sea of red, mainly impacted by the share price decline led the blue chips such as banks, telcos and developers. The STI ended -47 to close at 2,835 but there’s a strong sentiments that 2016 is going to be much cloudier than what the stock market presents at the moment.
The Shanghai index leads the fall in today’s Asian market session as it went to drop beyond 7% before the circuit break takes effect and the market went in halt for the day. The news quickly spread across the Eur and US market as we are seeing almost a negative 300 points drop on Dow, so there might be a chance after all that we get another black Monday so soon after what happened late last year.
I wrote an article in the past about how capital preservation is key during a prolonged bear market because we don’t want the value of our asset to keep dropping each day but the other parts which was not mentioned is that they are part of an overall package if you were to be successful in investing which means that as investors, we need to be able to stomach the ups and downs like the world is going to end and feel little or no emotion to it.
Timing in the market also appears to be much harder than it appears because seemingly almost anyone in the street can tell me that 2016 is going to be a bad year for the economy. But the stock market usually reacts in a different way. The more they are likely to happen the reverse they will happen. This is probably because the stock market reacts in advance to what the retail investors know so the decline may sometimes have already been priced in the share price, not all the time but sometimes.
Patience is key in investing but too much patience on the other side could mean loss of opportunity costs. The key is still to understand the valuation of the company you are looking into and ensuring that their fundamentals don’t erode with the revolving economy. I’ve seen a couple of friends who are sitting in cash in 2007 and are still sitting in the same cash in 2015. To me, it appears that they are just lost, not because they are patient enough to wait for the market.
We’ll have to see if the market appears bad enough in the next few days, as I had already some intention to put across my money from this month cashflow into work as I find the valuation of my stock watchlist attractive enough. We’ll see if that can happen.
What about you? Are you surprised at the opening of today’s selldown?