You have to survive with current STI downtrend

[jamestai]

Hi,

By now for those who have bought your stock between OCT 2010 - FEB 2011 most probably you are already making a lost. Instead of crying over your lost of your profit which I have experience last week myself, you need to quickly come back to your sense and start to take action. No point of regreting or crying over it. Is nobody fault for this current STI downtrend. Most important we have to survive this bad weather and then come back stronger.

First, by now you should know which are the weak stocks if has drop more than 10% from the share price you buy. Then look at it's dividend that it is giving you. If you think you like the dividend return and the company is consistently giving out dividend, then ask yourself if you want to keep the stock and earn the dividend to lessen your lost. Remember the % of dividend return is depend on what price you buy the stock. So you need to calculate and decide yourself what dividend yield that the stock is giving you. For example, I will not sell away my starhub, Cambridge, Lippo Maple Trust and Chip Eng Stock because they all give me very good dividends.

Second, understand the fundamental of the stock and ask yourself whether you trust the company or will it go bankrupt. Ask yourself do you need the cash now ? Are able to hold on to the stock until the market recover. You can study all the stock mention in this forum to understand which stock their FA is sound. For example, I will hold on to my Sapphire, Orchard Parade holding, Koh Brothers, KSH Holding, FJ Ben and Viking because I think they already proof to me they are all fundamentally sound company.

Third, don't hope/pray/wish that the current downtrend will turn around soon. Take action and cut lost of those bad stock you hold. The most important thing now is to save your cash and then buy back good stock later. Don't go and ask anybody else whether you should cut lost now or not, you need to make your own decision. If you never set aside emergency fund and all your money are in stock, then you better seriously get back some cash for rainy day.

Also remember for those invested in Gold and Silver, the recent rise of their price also help to buffer some of your lost.

I am just sharing my personal opinion here. Not giving financial advise, nobody will know about financial situation other than yourself. You have to make a decision and take action.

James Tai

[Trade2win]

Thanks James for your practical advice.
The current correction will very much depends on the political development in Middle East.

From TheStockEnthusiast:

"The catalyst for this severe down move was the unrest in Libya. The protesting and violence in Libya is a major concern for economies around the world. Major oil companies announce that they were already seeing issues with their oil production in Libya. This news caused oil to move to 2 year highs.

Higher oil prices are stoking concern that corporate profits will be reduced and global economic growth will slow down. Some economists warn that if oil were to reach $150 in WTI crude, the economy could be knocked back down into a recession. With all this fear, many people are becoming risk averse and selling stocks. However, we saw the stock market move similarly just a few weeks ago (on 1/28/11) after the riots in Egypt, only for the S&P 500 to rally 5% in the subsequent 15 trading days.

So, was Tuesday’s down move a window of opportunity for investors to buy stocks at cheaper prices, or was it the first day of a significant market correction?

In my opinion, the answer to this question lies less in stock market fundamentals and more in Middle East political analysis. If the violence in Libya is contained I don’t think oil will move dramatically higher in the near term and the stock markets could rebound. That is because Libya only exports 2% of global daily output. I believe that the 10% move higher WTI crude has seen in just the past couple of days, prices in the Libyan unrest.

However, if the rioting spreads to other oil-rich Middle Eastern countries, such as Kuwait, Iran, and Saudi Arabia, oil won’t just move higher… it will skyrocket. If that happens the stock market will continue to sell off, and the move lower could be severe.

Though I am not an expert on politics in the Middle East what I can tell you is that the situation in Libya will probably not end as quickly or cleanly as it did in Egypt a few weeks ago. Libyan leader Moammar Gadhafi vowed to fight to his “last drop of blood” and roared at his supporters to take to the streets against protesters demanding his ouster. Whether rhetoric like this will instigate the people of Libya into a civil war or into state of obedience remains to be seen.

How the situation in Libya plays-out could dramatically influence the citizens of Kuwait, Iran, and Saudi Arabia. Maybe it will deter them from rioting or maybe it will encourage them. Only time will tell".

[wemakebread]

Good sharing, James!
Thank you very much