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Sunday, October 19, 2008

How to Make Money Investing/Trading in the Stock Market in Recession?

First of all, "We Are In Recession!!!"
Our own PM Lee clearly stated that we have gone into Recession and we could expect slower growth for several quarters and economic outlook over the next 12 months was uncertain.
What a Wonderful news!
The hated "R" word is finally showing its glory, or so you may think.....
Congratulation on being able to witness and benefited from this
"historic" moment, since our last recession was in 2002, and maybe
some readers are new investors/traders and have yet to taste
the succulent rewards from the stock market.
There is a saying, "Money is Paper Blood", and indeed there are lot
of blood flowing around the world now, and forgive me for saying this,
this is the BEST time to step on those blood to your own
fortune. There are plentiful investing/trading opportunity in
this irrational and fear-filled Crisis, but you need to be aware
and to take action.

Next we need to be aware of our mindset and mentality in the stock market.
Are you a Trader, Investor, Speculator, Punteror just plainly Gambler.
A Trader, Investor or Speculator believe in a certain method and market concept
and capitalise with it to earn money from Mr Market, whether it is
Fundamental Analysis (FA) and/orTechnical Analysis (TA).
A Punter or Gambler only believe in one kind of analysis, Gut Analysis (GA), which is almost same as playing "Big", "Small", and Tips Analysis or the lack of it.
So which category(ies) are you in?

I am clearly in the first category.
I believe in TA, but I am not a Pure believer in TA, but I believe in combining FA, Market Sentiment,together with Price Action, Volume Analysis, Pattern Recognision and ultimately Trend Analysis or Counter-Trend Analysis which is a essential to any Traders and/or Investor. Although, I believe in TA, don't ask me or talk to me about using Indicators in trading the market, as to me, and to me only, they are just Useless tools, and they will bring you closer to Davy Jones' Locker rather than to Cai Shen Ye. I will talk more about all these next time......
Ok, let's discuss on how Investor can profit from this tough time?
Investors are typically long-distance runners in the stock market, striving to achieve Capital Preservation, Capital Appreciation and hopefullyLong-term dividend yield, by investing in fundamentally and financially-sound companies using evaluation and valuation methods such as P/E ratio, ROE, NAV and recently very hot P/B ratio, or some other "sophicated" method like DDM. Investor seek to buy below a stock's intrinsic value and normally will hold the stock long-term if not mid-long term.

We need to understand that currently our own market is in a Irrational Exuberance state and we are driven by the Fear Monster and many stocks are really in a deeply-discounted and unjustified low price. I am a strong believer of "Stay Invested" in current market sentiment and condition, as base on my own view and observation, we are pretty near to a market bottom, and we should see global and singapore market gradually stablise and consolidate. A lot of investors hope to buy at the exact market or stock low, but that is only a fantasy which not many can achieve. I can't foresee the market and stock low,so I have to stay invested and add on to some current stock positions or buy new stocks meeting certain criteria.
This crisis will claim the "life" of companies which maybe listed in Singapore,
but this is a good sign. It has always been "Survival of the Fittest" in the
stock market, and it signify a bad time for weak companies.
These weak companies has been busking under the sun, and now
that we are in a Perfect Storm, they are being weed-out and wash away.

My advise to mid-long term investor is to start putting moneyinto the stock market now, if your investment horizon is at least 2 years, I am quite confident that you should reap reward for your bold and wise investment today.You can consider investing in some strong blue chips or GLCs such as SPH, SMRT, Singtel, Keppel Corp and Sembcorp. You must always have SGX
in your radar, because in any market surge or recovery, it will move up the most.
I believe the 3 local banks are also trading at a bargain price right now,
and you should eat them up bit by bit. The property sector is at the "sunset" status
now, and I will avoid them for the time being, but don't forget them entirely......
If you have a higher risk appetite, you can consider investing in some S-Chips
To be continued....



Please be aware that I am not a Certified or Qualified Financial Adviser, the views and recommendation on this blog is purely my own.

Please seek investment/trading advices from your Financial Professionals, Dealers, Remisiers before making any investing/trading decisions.

I will not be responsible and liable for any losses incur from my views and recommendations in my blog.

Take note that I may have current positions or seek to enter or add positions in the stocks that I wrote in my blog.

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