Recently in this stock market crash I have been getting this question a lot, and I think it applies not just to this market crash, but to all large market corrections in general.
So, is it better to sell everything in your investment portfolio, or to hold on till the market recovers?
In this video, I share my thought process on how I make my investment decisions for my long-term investment portfolio, and I offer you two important pieces of advice which you can use to strategize your own investment portfolio.
In deciding whether to cash out, you need to determine if you are using an active or passive investing strategy.
If your portfolio strategy is passive investing like dollar-cost averaging, or annual rebalancing of an all-weather portfolio, then whether the market is up or down should not have an impact on your strategy, and there is no reason to change your portfolio strategy and panic sell just because there is a market crash.
If your investing strategy is more active, such as value investing, or asset rotation, and you are good at it, then by all means follow your strategy of rotating your assets into safe haven products like cash or bonds.
The problem that most people face is that they do not have a portfolio strategy in the first place. And if this is the case, then should you hold on to what you have, or sell it in case it goes lower?
In the past 50 years, the market has only corrected 30% or more about 5 times, and only 50% or more about twice. So we need to think about this in terms of a trade-off between upside vs. downside potential.
If the market has already corrected 30%, and you did not manage to liquidate your portfolio earlier, at this very point in time, how much lower can it go? Another 20-30% more?
But if you sell off and it recovers to the previous highs before you can buy back in, the gains you will miss out are 40-50%.
So you need to decide if the downside risks you are avoiding is worth the potential gains that you could miss out on.
Another major consideration is whether you are currently adding to your portfolio (cash inflow), or drawing out from your portfolio (cash outflow). This will determine how aggressive your portfolio strategy is, and I will talk more about it in the video.
Enjoy the video, and remember to “like” and “subscribe”!
Spencer is an avid globetrotter who achieved financial freedom in his 20s, while trading & teaching across 70+ countries. As a former professional trader in private equity and proprietary funds, he has over 15 years of market experience, and has been featured on more than 20 occasions in the media.
https://synapsetrading.com/wp-content/uploads/2020/03/market-crash-hold-or-sell.png5221012Spencer Lihttps://synapsetrading.com/wp-content/uploads/2019/10/logo.jpgSpencer Li2020-03-18 22:45:462022-12-21 03:05:58Market Crash: Is it Better to Sell Everything or Hold On? (For Your Long-Term Investment Portfolio)
With many momentum-based trading algorithms in the market nowadays, corrections tend to be sharp and vicious, leaving many traders and investors shell-shocked and unprofitable.
As a market participant, what is your strategy when approaching such a market? What is the best way for you to take advantage of this opportunity?
Enjoy the video, and remember to “like” and “subscribe”!
Spencer is an avid globetrotter who achieved financial freedom in his 20s, while trading & teaching across 70+ countries. As a former professional trader in private equity and proprietary funds, he has over 15 years of market experience, and has been featured on more than 20 occasions in the media.
https://synapsetrading.com/wp-content/uploads/2020/02/profit-from-market-crash.png5221012Spencer Lihttps://synapsetrading.com/wp-content/uploads/2019/10/logo.jpgSpencer Li2020-02-28 21:14:532022-12-21 03:13:18How to Profit from a Stock Market Crash (Panic Sell or Buy the Dip?)
Spencer is an avid globetrotter who achieved financial freedom in his 20s, while trading & teaching across 70+ countries. As a former professional trader in private equity and proprietary funds, he has over 15 years of market experience, and has been featured on more than 20 occasions in the media.
https://synapsetrading.com/wp-content/uploads/2020/02/does-your-portfolio-fare-well-in-crisis.png5211014Spencer Lihttps://synapsetrading.com/wp-content/uploads/2019/10/logo.jpgSpencer Li2020-02-25 13:04:342022-12-21 03:15:01Is Your Portfolio Anti-Fragile? (Does it Fare Well During a Market Crash?)
Every person has regrets, and as one gets older, it is inevitable that one would start regretting certain things. And when it comes to finances, what exactly do our seniors quip about? What decisions did they make that they regret the most? And most importantly, what crucial advice would they give to those looking to retire comfortably in the future?
REGRET #1: NOT SAVING MONEY WHEN YOUNG
This is one of the most common regrets that is universal to all seniors across the world, with older folk lamenting that they should have saved when they were younger. In fact, saving $10,000 in your twenties adds up a lot more than saving in your 40’s or 50’s. Compounding works to your favour the earlier you start. Expenses also start to rack up as you age, therefore it is much harder to save when you are older.
Property, health spending, and raising a family take up most of your money, and saving money gets a lot harder when the children are begging for you to get the latest mobile device for their birthdays.
Gambling and entertainment eats away at your nest egg, so stay clear of them! It’s never too late to start getting your money habits sorted out.
REGRET #2: NOT INVESTING TIME WELL
Back in the 1980’s, investing was a lot harder to learn without the internet. Now, it is an excuse to say that it is difficult to be financially educated. With kids these days being able to build a website from scratch (without supervision), I’m sure you will be able to find something to do that will bring you dividends in the long-run.
Most people complain about not knowing what to invest in. That is a reasonable complaint, but…
The reason why most people can’t invest money, is that they don’t even invest time to learn how to invest.
Time is sacred; use it wisely, and use it on what matters.
If your financial vocabulary includes any of the following:
buying blue-chip stocks for the long-term
mutual fund investments
investment-linked insurance policies
…you are missing out on a large chunk of the pie. A good diversified portfolio includes much more than just stocks. In fact, holding just stocks can be very risky, as seen during the 2008 financial crisis where most blue-chip stocks plunged by 60-80%.
Multi-asset class, multi-instrument investing is the norm now. If you’re not involved, it’s time to get started.
Another common misconception is that learning how to trade or invest is very time-consuming, but that is actually not true. Like any skill, it might take a while to learn it at first, but after a few weeks, you will soon get the hang of it and it will only require a few minutes a day to manage your finances and investments.
REGRET #3: SPENDING TOO MUCH ON THE CHILDREN
Many parents will look back on their days as young parents and quip that they should have spent less. Some of the bad outcomes include spoilt children, children who expect a lot but don’t contribute, and many more.
Among the many unnecessary expenses, parents could do well to reduce spending in any of these areas:
Extra-curricular lessons, like ballet, music, swimming (especially if the child is not enjoying them!)
Tuition lessons (the school system in Singapore is honestly quite robust)
Expensive pre-school education (they won’t remember what happened anyway)
Expensive holidays (we don’t remember them 1 year from now)
Toys that are thrown away 3 months later (we prefer iPads, honestly)
Expensive food at fancy restaurants (food, is still food)
Overseas university education (a local degree can be equally profitable for your child)
Expensive child-care services (reasonably priced ones will do the same)
A domestic helper / maid (teaching the kids to take care of the house makes more sense)
We sometimes put too much of a premium on university education. Pay what is fair and reasonable; don’t go about spending half a million on a university degree.
Many parents have money but very little time for the children. Ask any child and you would know that he/she would much prefer spending time with their parents than having expensive holidays in Paris, Dubai, or Tokyo.
On hindsight, you would always know better. But hey, take the advice of our seniors, and spend what really matters; our time.
For what use is all these cool stuff, cool experiences, premium lessons and holidays, if we don’t get what truly matters?
Spencer is an avid globetrotter who achieved financial freedom in his 20s, while trading & teaching across 70+ countries. As a former professional trader in private equity and proprietary funds, he has over 15 years of market experience, and has been featured on more than 20 occasions in the media.
https://synapsetrading.com/wp-content/uploads/2017/01/Elderly-Poor-Singapore.jpg427640Spencer Lihttps://synapsetrading.com/wp-content/uploads/2019/10/logo.jpgSpencer Li2017-04-12 05:54:292021-03-09 18:25:583 Biggest Financial Regrets of Retirees – And How to Avoid Them!
As the cost of living continues to increase year after year, you probably would have spent some time pondering about your financial security. You probably would have heard stories of or personally experienced a company downsizing, a pay cut, the loss of your job, mounting expenses, or just a sudden realization that the world isn’t such a stable place.
No matter when you discover this truth, it is critical that you come to terms with it. Only by knowing the truth can you deal with the reality of financial troubles ahead. Last year was marked by uncertainty, and it probably is just the tip of the iceberg of what can happen going forward.
For most people, wages will never be enough to sustain their lifestyle at retirement. Source: media.cagle.com
Talk to any taxi driver and he will probably complain to you about any of the following:
Rising healthcare costs
Rising petrol costs
Rising food costs
Rising housing costs
Instability in the economy
These money issues are real. However, before we go into the solutions, we have to understand where these problems come from.
1. Low Interest Rate Environment
A low interest rate environment means that you need to go beyond your bank deposits to preserve your wealth.
However, despite having more mobile phones than people in Singapore, we are painfully ignorant in financial matters. We are educated, but not wise; we are connected with each other, but disconnected with reality.
Truth be told, most people have no idea how to even match up to the bank interest rate, much less beat the bank interest rate. The average level of financial literacy in Singapore is still shockingly low. To be a decent investor, it would be necessary to at least understand basic financial instruments, financial asset classes, methods of speculation/investment, and simple risk management.
Financial literacy is the first step to fighting inflation. You don’t necessarily need to know exotic strategies like statistical arbitrage, premium collection on SPY options, futures pairs trading, spread betting, or betting on changes in the yield curve. But a basic understanding of market cycles and trading principles will make a large difference in one’s investment results.
2. CPF Alone May Not Be Sufficient
In years of economic boom, Singapore tends to experience inflation of 4-5%. The CPF ordinary account grows at 2.5%, which means your money’s losing value when the economy grows. Counting on CPF alone may help you get by, but would it really sustain the lifestyle you desire? Even if the inflation rate falls to 1-2% a year, very few Singaporeans can say they are able to retire comfortably.
It is more prudent to have something besides CPF to fall back on.
Some solutions include:
being willing to downgrade your apartment
holding structured deposits (can yield 4% or more)
holding high-dividend stocks
However, these strategies will probably only help in wealth preservation, not wealth creation.
For wealth creation, you need far more investment sophistication and dedication.
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3. Zero Inflation Could Be the Norm
A world of zero inflation is good for the average consumer (he thinks he won’t be paying more for his food/car/house/petrol), but it’s bad for wages.
Truth be told, when inflation suffers, it is normally a terrible situation for the economy to be in. Remember the productivity drive a few years ago? The government aimed for 2% productivity growth every year, because inflation was terribly low and the country had to do something about it.
Inflation has fallen and fallen, and has even turned negative in 2015 and part of 2016. Source: tradingeconomics.com
Stagnating or falling wages can become the norm. With wages in peril, it is even more essential to generate additional streams of income, or risk falling into financial destitution.
Examples of shrinking professions include:
F&B services
Marketing professionals (yes! because the supply has caught up with demand in recent times)
Insurance Agents
Property Agents
Logistics professionals (yes! because the supply has caught up with demand due to the euphoric onslaught of e-commerce firms)
If you have children, the best thing you can do is to advise them regarding these trends. Don’t be so concerned about their math scores, science scores, or whatever score; look to give them training in these skills, and to explore their interests in these areas.
4. Persistently High Property Prices
This is good news for existing property owners, but bad news for new property buyers. Singapore will continue attracting rich foreign buyers because that’s our value proposition as a nation. This problem keeps worsening as long as our property is affordable to wealthy investors from overseas. The government is likely to step in if property prices start falling.
The issue with high property prices is that most people end up taking 20 to 30-year loans and live with debt for most of their adult life. This keeps the economy stagnant and unable to experience growth like we’ve seen in the 1980s and 1990. A debt-ridden adult is much less likely to splurge. With an entire generation of people living with huge mortgage loans, we won’t see fantastic growth in a very long time.
A post shared by Spencer Li ?? Synapse Trading (@iamrecneps) on
5. Rising Medical Costs and Falling Government Support
Take note: it’s not the government’s fault; blame it on falling birth rates. With a smaller workforce, tax revenues will fall and Singapore will be less able to provide for its elderly.
Singapore will age, and more and more sick people will depend on a smaller proportion of working adults in this country. It’s inevitable that the government cannot support the large number of elderly who will reside in our hospitals and hospices. It’s the same ‘graying’ problem that Japan is facing.
Falling government support, along with higher demand for doctors and strained infrastructure will cause medical bills to rise. Sure, it’ll be great for healthcare stocks, but healthcare spending on the elderly is not expansionary. Basic health economics would differentiate between healthcare spending that improves economic well-being (vaccinations on children, basic sanitation etc.), and healthcare spending that does not improve economic well-being. We’ll be seeing a lot of spending that does little to boost the economy.
So, “What Should I Do?”
The fact that you’re reading this shows that you are concerned for your financial future. Keep learning, reading, and exploring ways to combat this reality. After all, people perish for the lack of knowledge, not the lack of determination. Acquiring the right investment skills, financial management practices, and general knowledge will help protect you and your family from financial destitution.
My greatest hope is that you, the reader, would be motivated to start educating yourself financially, and to get your hands dirty in the investment world.
Spencer is an avid globetrotter who achieved financial freedom in his 20s, while trading & teaching across 70+ countries. As a former professional trader in private equity and proprietary funds, he has over 15 years of market experience, and has been featured on more than 20 occasions in the media.
https://synapsetrading.com/wp-content/uploads/2016/12/rat-race.jpg11031767Spencer Lihttps://synapsetrading.com/wp-content/uploads/2019/10/logo.jpgSpencer Li2017-03-28 07:00:002021-03-09 18:26:19Here are 5 Reasons Why You May Never Get to Retire Despite working Harder
Time is sacred; use it wisely, and use it on what matters.
We sometimes put too much of a premium on university education. Pay what is fair and reasonable; don’t go about spending half a million on a university degree.
