Saturday, 2 February 2013

When market is in mini bull run..

2013 has been a great year for the stock market.

Likewise for my portfolio, it has also been a one way ride: up. Even this counter that was near 50% loss is powering ahead such that it has turned into black.

However, is it a case where I am truly an investor extraordinaire with highly skillful stock selection, or is it a case of rising tide lifting all boats?

It is at such juncture that one needs to remain cool headed, and not get carried away by the euphoric market and lured into thinking that I have the midas touch. It will be great to ride the way up, but important to not fall into the trap of greed and add more position into the market.

Remember Li Ka Shing once said 'Do not be overly pessimistic when the market crash; and do not be overly bullish when the market rise'.

I am trying to emulate that, hone my emotional stability by constantly telling myself to be extra cautious and do not over commit. In fact, one should slowly take profit on the way up to reduce exposure to stock, as risk is now higher with much lower rewards.

Of course, I also give myself due credit for holding on to the counter mentioned above, and dared to average down near bottom price, without which I will still be a long way from breaking even today. With hindsight, I had reasons to back the double down, but in actual fact, i was taking a bet with calculated risks. It taste extra sweet now that the market seem to have vindicated by decision back then.

For now, I feel that there is still some room for further rally, as all the economic indicators from US, China and Europe point to a recovery that is slowly gaining momentum. The Dow Jones is within a whisker away from its all time high. These are good signs.

I caution against entering the market aggressively now. I have to exercise extra discipline to do this. I will go with the flow and see how high my portfolio can go, and also be patient to wait for the next downturn to pour my opportunity fund into the market.

However, i plan to reduce my cash position from the current 49% to 40% of entire portfolio to reach an optimal balance (i feel that 49% is half in cash, which is too conservative). I will do so at mini corrections along the way. I will then be able to earn more returns, yet concurrently having sufficient ammo to strike when opportunity arises.

Remember, greed and fear are the biggest enemy to an investor, and patience is always a virtue.

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