Thursday, June 4, 2015

A Five-Letter word which retail investors must know before they invest

The Singapore stocks markets, as measured by the benchmark STI has headed south by quite a fair bit. While reports that I read suggest that the big funds are pulling out from the Singapore markets into China’s markets, I suggest a key element of the “southing” of the Singapore markets is due to the Greece’s debt saga. With talks of the debt repayment packages and “conditions” finalizing, this is the Eurozone’s factor. On the other hand, I read over at the US side, some analysts are saying that the economic conditions are not sufficient to justify an interest rate hike yet. There we have, in a nutshell, the three factos from the three’s biggest and most influencing economies: US, China and the Eurozone. Undeniably, Greece debt saga should have the biggest bearing on the world’s markets including Singapore’s should Greece default on its debts. What’s more, China’s stocks markets heading up and the US Federal Reserves’ decision to increase interest rates would ultimately translate into a longer-term good for the world economy though some raise a caveat on whether China’s stocks are forming a “bubble”.

I know what I have shared above is nothing new but I wonder how many investors take into perspectives of this “bigger order of things” of the stocks markets when they invest? Investors who “are greedy when others are fearful” make the mistake of buying stocks down. From my years investing in the Singapore stocks markets, I think a more important lesson for retail investors is not to be “Greedy when others are Fearful” but to just “Respect the Trend”. When the trend is against buyers, “cheap” stocks become just “cheaper”. When the trend is up and positive for buyers, even an average stock can reap good profits for investors. Respect the Trend and the Trend will respect you as an investor and reward you accordingly in capital appreciation. In summary, “Trend” is the five-letter word which all retail investors must know and appreciate.

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