Even though I know that bear markets, market correction and panic are some the best times to buy stocks, I realized each time that it has happened, I have failed to maximize my opportunities.
Take for instance the GFC in 2008. I did one good thing by buying DBS at the low of $5+. And we did well on that after it issued a 2 for 1 rights call. I did not do any FA or TA on DBS, I just knew that it's a core economic function of Singapore, there is no way the government will let DBS fail. The mistake I made was selling it off too early after it hit $16+. Had I kept it all the way now, the returns would be a lot greater if I added in the dividends received. At that point, I did not understand of beauty of dividends in boosting your overall returns.
On looking back, what was worse was that I did not empty my war chest to capitalize on the GFC. I was certainly not financial savvy at all. In fact, I was sort of freaked out by the 50% or more crash in the prices of the stock that I held. My saving grace was I held on to most of them, bought some to average down as they were stocks such as Capitaland, Genting, CapitaRChina Reits which I believed were backbone of the country's economy.
In 2012, I got into stocks like FB and MSFT at really great prices. I got into FB because from my experience on FB, I knew it was making lots of money from their online advertising business and MSFT because the stocks were really quite cheap compared to historical prices. Looking back, prices at that time were probably subdued due to the Euro Crisis, where Greece was on the verge of bankruptcy. Additionally, tech stocks had not quite recovered at all from the GFC.
My mistake? Again, not putting out more capital to buy more stocks. I believe my mistake stem from the fact that I was afraid to lose money since half the time I was mostly buying stocks based on gut feeling instead of any knowledge on how the business is doing. I knew what business they were in, but I had no idea if they were financially healthy or not. Additionally, I think I had been spooked by the GFC and was always worried that prices may suddenly crash in the near future.
Come end of 2016, The US Elections, I had my war chest ready.. ready to go all out when the market corrects when Trump get elected. I was all wide-eyed when the market shot up instead of turning red. The Trump election had woken up the sleepy bank stocks and sent them shooting to the sky in 2017. Not understanding why or how that could have happened. I missed the boat on the bank stocks instead.
So while, I have read much and understand many high level concepts like invest during bear markets, market corrections and panics, the actual application of the concepts has not been so easy. While in the midst of corrections, there is always fear that prices may go lower and yet once I see a slight upturn, I worry that I have missed the boat and making the mistakes of chasing after returns.
These are my shortcomings that I need to overcome by getting better with position sizing and improving both my TA and FA skills. With position sizing, I accept that I cannot know if prices will go up or down tomorrow of if the prices have bottomed out. Hence I can start off with a nibble, and if prices go down some more, I have capital to load up. TA provides some form of guide while I get better at FA.
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