1. Credit card bad loan- a jobless man will spend using their credit card and let the loan outstanding. The credit situation will turn into bad loan after 3-6 months. Therefore, the credit card issue may burst somewhere after May 2009.
2. Deterioting demand for goods- the contagion effect from the sharp increase in the unemployment rate will continue. On the other side there are some good effect from the global governments' stimulus package.
The above may or may not happen depend on US goverment's stimulus package.
The concern for most investors out there is when is the right time to invest?
My advise will be : get ready to invest and most of the time we won't be able to know the market can go down to which level. What we can control is our investment strategies. But before we move on to investing, it is good to know the following:
1. Know the amount that set aside for investment.
2. Know the potential risk/losses that you willing to take. (worst scenerio, at least to hold for 3 years)
3. Know the number of counters you ready to invest. (also depend on your investment amount)
4. Know the number of quantity in each counters you ready to invest.
5. Apply some dollar cost averaging method.
Strategies: Simple Investment Method (SIM) 1-2-3-6
Assumption:
1. If economy continue deterioting, the equity market may drop up to 30-35%.2. Whenever economy recover, equity market tend to rebound 20-50% from the bottom.
3. The recovery will be very strong and atleast for 3-5 years.
4. Invest in benchmark counter@SIME .
Let us divide our investment amount into 12 portions (1+2+3+6=12).
RM120,000 investment value:- RM10K-RM20K-RM30K-RM60K
Step 1: NOW KLCI 900---------------- Use 10K to buy SIME @ 5.60 -------------1,785 shares
Step 2: KLCI 810-765 (drop 10-15%)---Use 20K to buy SIME @ 5.04-4.76-- 4,081 shares
Step 3: KLCI 720-675 (drop 20-25%)---Use 30K to buy SIME @ 4.48-4.20--6,912 shares
Step 4: KLCI 630-585 (drop 30-35%)---Use 60K to buy SIME @ 3.92-3.64---15,873 shares
Total quantity = 28,651 shares bought at average RM4.19.
Compared to closing price of RM3.64, investment portfolio drop by 13% or RM15,600.
If the recovery really take place after equity market drop more than 30-35%, I believe the rebound will be in the range of 20-40% within 1 year. That means, SIME may recover from 3.64 to 4.36 - 5.10 level or even higher.
Based on RM5.10 level, the investment portfolio will provide return of RM26K (21.7%).
If the whole economy recovery for atleast 3-5 years, I think SIME may try to go back to its previous high. If SIME can go back to let say RM 9 level after 3-5 years, the total portfolio will have a return of RM137K.
Highlight:
1. Use your own strategy which you feel more comfortable instead of trying to guess the right timing to enter market.
2.The above investment startegy allow you to exist either in step 1,2,3 or 4 whenever there is a technical rebound take place and the portfolio is making money.
For further inquiry, call me directly.
