Thursday, 27 June 2013

The psychology of buying stocks in this market

Dear Friends,

Asia recently did indeed correct itself. On radio, we talked about both US and Asia. We mentioned that we anticipate Shanghai composite to reach a bottom at 2000, Nikkei at 12800, STI at 3000-3100, (the best is for STI to drop to near 3000), Hang Seng at 20000. All have reached its low point except STI. STI is close, 3066 being the lowest point.

Anyway, we anticipate that STI will drop at most a further of 66 points to around 3000. Most of the stocks were sold down, especially the STI component blue chips. I definitely prefer banking and property sector stocks.

Do take note that there is still a chance for US to go down somemore, we still think that the correction in US may not have finished, although Asia might have!

If you want to enter position, our idea is to break your portion of money into 3 parts. Either accumulate up or accumulate down.

Eg. If u intend to buy a stock with $30k, break down into 3 portions of $10k.

For accumulating down;
If you buy a stock at $1, buy with $10k. If it goes down 25% to $0.75, buy another $10k. If it goes down another 25%, buy another $10k.

The good thing about this is that you don't buy at one go. You have extra cash just in case it drops further.

For accumulating up;
If the stock goes up 20% buy another time, when it goes up another 20% buy another time. Whenever you buy, put your stock loss at breakeven point, to guard your downside.

Rgds
Daniel

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