Investment Strategy for 2014
2014 is expected to be a good year for the markets, at least according to the analysts. Corporate profits are expected to go up, and markets are cheering since the tapering had started slowly and not as bad as expected. Economics are humming along, which should be good for equities.
Personally, I think one should be prepared for volatility in the markets for the year ahead. Your portfolio must be able to withstand market correction and also take opportunities to re-invest back into the markets when valuation is attractive. Remember to protect your downside first and the upside will take care of itself. My strategy for investing in 2014 are:
1. Look for deep value stocks. As markets recover, one might be tempted to chase for high growth stocks since the stories will be rosy. Growth is also expected to be priced in for these stocks and one must be prepared to pay for high valuations to buy into their expected high growth. Personally, I have become more defensive when markets go higher. I tend to invest into more value stocks than growth when markets are high. This should be one of the must have strategy if you want to be defensive.
2. Look beyond the blue chips and mid cap space. One must be prepared to invest against the crowd when markets are high. Therefore, do spend sometime looking at stocks which had been ignored by the markets for quite sometime. Low volume and lack of news flow are typical characteristics of small cap value stocks. Also, be prepared to look beyond the usual blue chips, mid cap stocks in order to search for gems to invest in.
3. Keep a lookout for M&A deals. Similar to last year, some companies might decide to throw in the towel and delist from SGX or being acquired by bigger companies. Keep a lookout for these category of stocks as the return is quite decent if the company is being delisted at a fair valuation. A few of the s-chips had been delisted from SGX last year and this category of stocks might be another place for idea generation for delisting in 2014.
4. Do not be aggressive, but be prepared to re-invest your proceeds slowly in good ideas. A lot of times, we tend to be aggressive and invest all in one go when markets are going up. Though my strategy is to stay almost 100% invested at all times with minimal cash holdings, it doesn't mean that I have to invest all my spare cash in one go. I normally try to spread my investments slowly in a few stocks at any one time, rather than trying to invest all in one go for one stock. In this way, you can stay invested and also spread your time and stock concentration risk.
5. Build up my stock knowledge "database". What this means is to read widely and build up your individual stock knowledge. You might not be buying or adding onto the stock currently but it doesn't mean that you do not need to know anything about it. Stock ideas can come from your own stock "database" too and you need to also exchange ideas with fellow investors. Therefore, when there is no AGMs/EGMs etc going on, instead of staring at the stock price screen, one should spare sometime to do some catchup readings on companies.
6. Reflect on my portfolio, review strategies. Sometimes, your portfolio might not perform as what you have expected and it might be because of asset allocation mistakes, wrong company selection etc. Try to review and refresh your portfolio management strategies and reflect on your mistakes. Do read some books on portfolio management techniques and also see how it can be implemented on your current portfolio to make it better.
7. Do what I have been doing. I will still be subscribing for rights issues, taking up scrip dividends, attending meetings etc. These are the regulars that a full-time investor like me had been doing and I will continue with them in 2014.
That is all I have for this posting. I wish all of you more happy returns in 2014!
Labels: Strategy
posted by ghchua at 4:27 PM
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