Tuesday, 10 September 2013

Buy, Hold or Sell?

Down from 1800 to 1700 and now KLCI is above 1750, has the storm gone? Or it is to prepare for an even greater thunderstorm?

We all know the reasons behind the mid August stock market slump especially in emerging markets - the impending tapering of QE in US and the fear of Syria war. Though the possibility of Syria war is getting lesser, but the gradual withdrawal of QE seems inevitable.

Locally, while 20sen increase in RON95 petrol price may reduce some financial burden faced by the government, it surely will increase the cost of living and affect investors' sentiment. We should expect lots of cut cost measures in the upcoming 2014 budget.

When the worry on QE withdrawal re-emerge later, there should be another round of panic selling in the stock market.

So, what should we do with our shares on hand? Should we sell, hold or buy low? 

You may think that the stocks you hold are fundamentally strong or undervalued, but they are usually not exempted from the drastic fall in share price in a bear market! Should you sell now and buy it low later? What if the bull beat the bear after you sold your shares?

I don't know...

For the past 3 weeks when KLCI started to dive, I actually did nothing, because the companies I hold are doing very well financially... As a result, I see my overall paper profit falls almost 60% at one point. Now even though most share price slowly crawl upwards, I think it is unlikely to reach previous peak within this year. Should I accumulate more shares at lower price or sell now in anticipation of another stock market slump?

If I sell my shares earlier and buy back at lowest point, then it is a perfect scenario. However, no one can predict market movement accurately.

I'm sure most "long term" investors especially the less experienced ones will have this dilemma now: buy, hold or sell? For speculators, perhaps it does not matter much. No matter what you decide, it is important to plan ahead & expect the worst.

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