Tuesday, March 15, 2011

Simple Investment Model- For Uncertainty In The Market

On Tuesday March 15, 2011, 10:13 am EDT

...Stocks opens sharply lower, bond prices rise, as nuclear crisis in Japan intensifies


INVESTORS CONCERN: WHEN CAN I ENTER THE MARKET?



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 case scenario, at least to hold for 2-3 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 as follows:


Simple Investment Method (SIM) 1-2-3-6

Assumption:

1. If economy may deteriorating due to Japan nuclear effect, the equity market may drop up to 30%.
2. Whenever the economy recover, equity market tend to rebound 20-50% from the bottom.
3. The recovery will be very strong and at least for 3-5 years.
4. Invest in fundamentally sound companies with solid business model .


Let us divide our investment amount into 12 portions (1+2+3+6=12).
Example : RM120,000 investment amount
Timing to enter market:-
1. If market drop 5% - invest RM10K
2. Market drop another 5%-invest RM20K
3. Market drop another 5%-invest RM30K
4. Market drop another 5%-invest RM60K

Look for company with potential to pay out dividend for next 1-6 months to get some dividend income during this period of time.


GOOD LUCK!


Remarks:
1. Use your own strategy of which can let you feel more comfortable instead of trying to guess the right timing to enter market.
2.The above investment strategy 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.

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