Survived The Second Market Dive

We are several days into the second market dive (this time caused by worsening Euro debt crisis and US high unemployment) and the worst seems to be over. Once again, my REIT counters have resisted themselves well against the latest market dive, second in a row since August.

For example, AIMSAMP did not dive below the $0.2 and Starhill Global floated well above $0.6 in the starting week of this month. This performance shows that the second market dive is less of a destruction than the first one in August. Admittedly, my counters are still in the sea of reds, but this time paper losses are minimal. This is partly because of my averaging down strategy where I bought shares from time to time as prices dived in the first market crash. But I won't employ this strategy again as I realised that my funds are very much limited as a small novice investor. The next time when another major stock storm approaches the shores, I would employ the hit-the-supports strategy, which states that a stock investor would only buy new shares when the prices hit a support line and not when it is falling halfway down. As the saying goes, never catch a falling knife. Pick it up only when it has dropped onto the floor. Hit-the-supports strategy would definitely allow me to sleep well at night and let my counters spin back to green at a much faster rate than averaging down, at only a fraction of the funds needed. I will explain this in detail in my next blog post.

Some conservatives have commented that my highly-concentrated exposure to only two counters which are purely REITs (not blue-chipped ones like CapitaMall) is dangerous. I beg to differ. In the series of market dives since 2008 recession, both of my chosen stocks have displayed the resilience that is needed to sustain my claim that you can be highly-concentrated, almost dangerously, but very safe. Of course I don't recommend you to throw your eggs into one basket but how about two? I am doing that now and my wounds are only this minor. Had I diversify my stocks across many "safe bets", not only my dividends are much lower but in a market dive, even blue chips are not invincible. At least the fall in prices of my counters are partly compensated by their high dividends.

This is why I can sleep well at night without worrying so much about my investment. Just have a plan, a formula, a strategy, and a goal and you are on your way to success.