Saturday, September 13, 2014

Are you prepared for the next equity stock market crash?

First of all, apologies for the lack of postings in the last couple of days as I was busy preparing for both work and school projects due.

Being as busy ever, I still kept a look out everyday on the macroeconomic front news to keep up with the latest news on what is happening around the world.

Recently, as the stock market hits a new high in the US, there's been a growing feeling that some investors have been looking for an exit opportunity before the "potential" stock market crash that no one really knows when will it be coming.


Some big players like Soros, for example, have been preparing for the crash by accumulating a huge long position in Gold, where he believes acts as a proxy to safe haven when the stock market crash is on the horizon. Another big player, Icahn, increased his holdings in energy stocks to hedge against a stock market crash.

There are fellow bloggers I know that kept their eye solely on the business and valuation of the company without accounting for any noises from the market. And then there are other bloggers who kept their current holdings without selling but increase their allocation of investment warchests to prepare for the next crash.

I think it is fair to say that different investors have different types of strategies to prepare for the next market crash. For myself, there's really a couple of things I would like to do personally:

1.) I am open to selling my current positions if I feel they are somewhat fairly or overly valued. I always feel that if the price of a stock is not what you would like to buy, then it would be the price you would like to sell. So while the buy and hold strategy still holds true, I do take into account its price multiple valuations closely, i.e how much price relative to earnings it has run up.

2.) I see gold as having a unique feature to outperform as speculative assets when there are uncertainties that might threaten our currency fiat system. I currently hold some physical bullion that makes up about 4% of my overall portfolio allocation, so I think it should be fine for now. I would like to build up this position up to 10% eventually, so we'll see what happens.

3.) I would also be building up my investment warchest somewhat aggressively from now on, so I would not expect too much action on the buying front for the next couple of months, unless something becomes a value buy.

What about you? What kind of strategies do you employ when preparing for a market crash?



10 comments:

  1. Nice, good read~
    Gold would be a good way to hedge against a market crash for sure

    ReplyDelete
    Replies
    1. Hi Felix

      We'll see if the market fear would push investors to go for gold in the near term ;)

      Delete
  2. Replies
    1. Cash is rotting???

      Dun worry your irr will push up some day after the crash

      Delete
  3. At least must keep the job even if investment does not do well! :)

    ReplyDelete
    Replies
    1. Hi Rolf

      If investors can get it right it would worth a lot more years than sitting in a corporate office. But its easy to say than the real thing.

      Delete
  4. Hi B,

    Today's STI drop led me here... What's your take B?

    Regards,
    The Independent Abecedarian

    ReplyDelete
    Replies
    1. Hi TIA

      I was talking to fellow bloggers about the recent two days 70 points drop in sti and I think it started to raise an eyebrow already for some investors.

      I think the market is still high at this point to warrant releasing the warchest. Another 200 points drop and I might be tempted to release some depending on the individual stock I see.

      Delete
    2. Hi B,

      Based on your reply, you seem to see it as more of a correction than a retracement thing?

      Regards,
      The Independent Abecedarian

      Delete
    3. Hi TIA

      It could be.

      I am trying to build up more warchest and I think sti at 3300 is a decent way to start. It appears that recent fed activity means that low interest rates is going to prolong but I think we can see a glimpse of what can happen if news turns the other way round.

      Delete

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