Seeing how markets have plunged, should I hold back on investing now and focus more on savings? But I often also hear about the buy-low sell high concept. Any advice? - Seedly
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Anonymous

Asked 2w ago

Seeing how markets have plunged, should I hold back on investing now and focus more on savings? But I often also hear about the buy-low sell high concept. Any advice?

I also have a lower risk tolerance level. Would it be wiser to just save and not invest for now?

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Hi Anon,

Start today. Plain and simple. It's something I've done myself, suggested to family and to any private clients.

There is little benefit to procrastinate.

It doesnt matter what the market will look like next month. It could be much worse, a little bit worse, same, better... ?

What matters to you most is to be able to invest and not look at it for 5years. It is very likely (when you look back then) a great decision.

It is better to give up the idea of finding a market bottom because low can always go lower.

Bad news has always been around and may persist.

Avoid losses totally is not an investment goal and neither should you wait for "all clear" because it doesn't happen.

Have a plan like dollar cost averaging and stick to it

Read more from our article "Don't worry about the market bottom" here

PS: Follow us also on Telegram too

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Takingstock @
Takingstock @
Level 6. Master
Updated 5d ago

>> Price is what you pay, value is what you get.

>> Buy low sell high is more towards trading, buy low to get a higher dividend yield is investing.

What I have learnt in the past years is that focusing on price for gains... Is more of trading, and tends more often than not to lead to investing mistakes, the worst from your own emotions.

>> For lack of a better example, you have 17k. You managed to buy 1000 shares of stock xxxx at 16.97, +/- fees, your cost is 17 per share. If xxxx maintains dividend of 1.32 per year for the next 20 years, and doesn't collapse from the recession, you have received 20 x 1.32 = 26.4 per share in dividends, at a dividend yield of 7.76%, ignoring the possible dividend increases or cuts, price fluctuations or potential unrealized gain.

If you understand this example, the future price is only an illusion. You are exchanging 17 dollars for a future stream of 26.4 over 20 years and the possible sell price then.

It took me a few months to master this concept, and a longer time to forget what the world was trying to teach me for 30+ years.

note: this is not a buy / sell call for stock xxxx, only an example

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L
Leo
Level 4. Prodigy
Answered 6d ago

Going to give you a different perspective. Not everyone will concur with this perspective though.

I shall start with risk first. You have low risk tolerance. What is risk first? Is risk losing money? Or is risk not entering the market? (Opportunity cost.)

You must first define and understand your risk before you know what you want, because, you have low risk tolerance right?

To me risk is not knowing what you are doing. Eg. Knife are sharp and dangerous in the hands of a little baby, but not in the hands of a trained sushi chef.

In the context of investment, risk is subjective. What may be a risky investment for person A, may not be risky for person B. Risk can be divided into multiple facets, especially for a retail investor.

If you don't understand yourself and what you are getting yourself into, best is to save and put into CPF.

Just because the market has plunged does not mean it is a good time to invest. What low can go lower. What high can go higher.

Is it really low now? What if it goes another 50% lower? What if the investment that you selected goes 50% lower but it did not recover when every other thing seems to recover?

Buy low sell high, hold long terms are all correct concepts, but it is too generic. Best is to understand yourself, understand what you are getting yourself into.

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If you plan to enter the market, any plunge is good to enter. Set a target price which you want to buy, then buy as long as it hits it. Then with this you will have 2 scenarios:

  • drops even more: buy even more at better discounts

  • price increase: you have already a good position compared to those who dare not buy on a once in 10 year discount

Compare with the hold back strategy:

  • drops even more: dare not buy

  • price increase: research found that the best recovery comes after a crash, you'll be missing on the best recovery of your lifetime

That research: https://www.jpmorgan.com/securities/insights/the-beauty-of-doing-nothing

How to invest in a market crash: https://youtu.be/Eaz42HYPp58 ​​​

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