Asked by Anonymous
Asked on 07 Jun 2019
This is the problem with timing the market. Nobody knows for sure when the market may or may not crash. One may lose the opportunity cost of investing due to his fear of a recession.
To a value investor, what matters more is how one values a particular stock. If a particular stock is undervalued, that is the best time to own a share in the company.
However, it is definitely always good to keep some spare cash in the event where the market crashes, the opportunities of good stocks becoming undervalued is maximised.
At the end, one must properly assess the reasons why he wants to own a particular share of the company. The fundamentals are key to becoming a great investor.
The best case scenario will be to invest when the market is at it's lowest point, but that would require a lot of luck and patience..
After all, there might be a chance there won't be a recession for the next few years to come. no one is able to predict such a scenario accurately.
As such, you should start investing first, figure out some of the strategies yourself after you've started (took me two years to figure out some money saving strategies...), and still keep a portion for the event where the market crashes. Ever since I started two years back, people have been postulating a recession but till now, new uncertainties have emerged..
Know Your Personal Finance Well? Become A Seedly Prodigy!
Level up your game and take home some Grab credits! Click here for more details.
No one knows.
2 years ago I thought recession will come it 2020.
Now I feel bad for the lost oppotunities. So I started buying some stocks recently. I sold some too.
I do have some more capital for buying shares if the recession comes though. Percentage wise. 40% in stocks. 30% in OCBC 365. 30% in SSBs currently. So up to 60% can be used to invest if recession comes. Previously it was 25% in stocks only.
If you are investing for a long term say 30-40 year,s there will definitely be an market crash or two.Most important is to not panic and sell your stock straight away,you must learn to control your emotion well in the investing game!good luck!
do support my personal finance blog @http://sonicericsg.blogspot.com/
I'd think that recession warnings are somewhat paradoxical, in the sense that the higher the awareness of an impending recession, the least likely it will occur, when traders and investors become more defensive in their trades.
Furthermore, governments and financial institutions will work hand in hand to prevent it from happening, or at least cushion the impact.
I personally feel that it makes more sense for a recession to happen when there is a sudden reversal in the overall market sentiment during an extended period of over optimism and confidence.
Therefore, no recession for me in the near term.
Of course but it'll be a bit tricker. It's hard to perfectly time the market so as to buy at the trough and sell at the peak. However, there's still things you can do to improve your chances.
You can look at companies that produce non-cyclical consumer goods. For instance, when economy is doing well, people will buy more ice-cream to enjoy. When times are bad, more instant noodles. These companies are much more resilient though they can be pricey.
You can also look at transportation services. Chances are, people are less willing to spend so much on grab, taxis and the many when they have lesser pay.
You get the idea.
Hold the asset long term. Equities by nature tend to appreciate over time and it is likely that you'll still profit even if you bought near the peak over long holding period.
I’ll liken this to marrying to a woman and living happily ever after (since I’m a man but it applies to women as well). If I were to paraphrase, it’s like asking, is it a good time to marry when divorce rates are forecasted to be at an all time high in 2021?
Notice how there seems to be some correlation but not causation?
When you marry someone, you marry the one who is compatible with you, and you aim for happily ever after. Similarly when investing in stocks, you want to invest in excellent companies who can stand the trials of economic recession. Because no one can accurately forecast when the recession will arrive. Having said that, it doesn’t mean you expend all your cash on stocks. Always keep a standby, in case more opportunity comes up at a bargain.
Just like you would be prepared to handle some unpleasant incidents, because they do happen, even in the most blissful of marriages ( and not because you expect your marriage to be miserable, right?)
Investing can never be really "safe" , just like in 2008 it just goes, it goes.
Do have a balanace weight on Bonds (Safer options) like SSB and some on something that is a little risker but more returns like REITs, FX, etc.
I will say start somewhere, start small and observe the market. If you are worry you can also look into robo advisory which they have auto-rebalancing for you, the same theory applies, start a small amount which you are comfortable and monitor.
My view is , the best time to start is yesterday, even buying into a Bond ETF (A35 code in SGX), yielding about 2%++ , it is still a good start. All the best!
No good time or bad time to invest. The key is to start learning as opportunities are abound even at so called "bad" times.
The best investment is in yourself. You can spend your money to re-educate or learn something new even during recession time.. It will take you further during recovery.
Top Contributor (Jan)
It may or may not happen. The past 10 years "experts" have been calling for a crash. Where is the crash?
There are always "experts" trying to predict a certain event but no one can tell for sure. We don't have a crystal ball to see the future.
Invest within your risk appetite. Invest consistently. Do not panic in down times.
Hello! I’m Cassandra, the community manager for CoAssets Pte Ltd. Each investment opportunity/product will of course come with its own risk. How one defines ‘safe’ actually depends on each individual risk appetite.
Back to your question, there is never a good or bad time to invest, however, it is also dependent on the type of investment product you invest in. Some products may be susceptible to market volatility while others may not. For example, stocks are considered to be of higher risk and risks are escalated during such periods. While other investment products such as debt based crowdfunding, wine or art investments may not be affected by market volatility.
For example, CoAssets Pte Ltd provides investment opportunities in the film industry. The main factors determining the success of a film includes public taste, aesthetic merit, competition from other films released at the same time, quality of script, quality of the cast, and the quality of the direction etc. As everyone would know, there was a recession back in 2008. However, when you take a look at the global box office revenue, it has been been increasing each year from 2005 to 2018 as shown: https://www.statista.com/statistics/271856/global-box-office-revenue/ I would conclude that regardless of recessions or any market ups and downs, the film industry does not seem to be affected. People like you and I would still continue to go to cinemas or stream movies :)
Let me know your thoughts! Happy investing! :)
Read this blogpost too, I share the same sentiments as dividendwarrior:
Key principles to abide to:
1) do not invest with money for emergencies and specific near term commitments, eg hdb downpayment, wedding. This means you can look over a longer period and you should because news changes on a daily basis, they could say unemployment is low now, and reverse the stand next quarter. Changing your investment positions regularly based on so called news incurs a lot of buy / sell cost.
2) nothing wrong with taking small steps, and then adjust according to your comfort level as things move along. If you worry about the recession... What if the govts come down and settle, and revert the recession? No one has the crystal ball, but then good businesses will ready their investments and balance sheets and manage their way through the downturn. These are the ones you should be going for, because they manage themselves and you can "free-ride".
My forward thinking is I will split my annual savings three ways:
A) 1/3 to deploy for regular savings into good counters w at least 4% dividend yield
B) 1/3 for adhoc bargain purchases when there is promo to buy good blue chips or reits @ like 10-20% discount or dividend yield between 5-8%
C) 1/3 for the supposed recession where everything is like @ 50% clear warehouse sale which I have been waiting for 2 yrs by the way
There is nothing wrong with taking small steps to start the journey. At least you are moving along.
And very few can tell you they can really really get the best price at the right time. It doesn't have to be an all or nothing approach for investing to be honest.
Take for instance singtel, which was estimated at 5.5+% dividend yield for a while (17.5 cents dividend / price). In the last 52 weeks, I think lowest was abt 2.92. Under rsp, I bought lowest @ 2.98 and my average cost was 3.15. Its 3.4+ now after but what really changed? I dont really know LOL.
To manage risk, my current approach (using the 1/3 regular savings) is a double dca approach:
A default 500 monthly contribution to the best dividend yield stock on bcip until "the next review". 500 per month is not a lot, and I save the remainder that I could save in an investment reserve for occasional buys. The lower the price, the better the yield. When the yield is better than 5%, I increase the contribution / buys, if the yield drops, I lower the contribution or even stop contributing (if yield is less than 4%).
Sure, there are opportunities in good and bad times. It’s how you see the market. Down times are the best to activate your warchest and go on a shopping spree for sound and grounded companies.