Investing always is in uncertain times.
On Thai investor strategy in always uncertain times.
My answer is not what the nervous nellies want to hear as these are forever influenced by the near term often blown-up uncertainties and besides overly negative press reports. These folks wrongly keep believing that “an investment is only as good as you can sell it at a moments notice”. My answer however is with a question back. As often asking a question helps one see more clearly. Here so is my question in return to the above raised:
When an asset is priced cheaply enough and current yields (income) is high (and far above the return on Bank interest rates), and if this current return is fairly stable and likely rising over time and can be diversified, does it then really matter if the principal invested fluctuates around the forever near term uncertainties? If a cow brings you lots of fresh milk daily and likely more in 2-3 years, do you care that much what the current price of cow meat is at the butcher?
Of course it matters some, as if you need to cash out for whatever reason, or have better ideas with it, you need to sell it. But it does not matter as much as people want to think, and it surely does not matter with all of your capital. What could happen which would require you to need all your investment capital in a few days? Investor capital can be staggered where some of it is earmarked for medium to longer term. The point being, that if you absolutely insist that at any time you can get all (or near all) your capital back, you pay a high price for this fictitious “need”, this by never earning much with it.
If the uncertainties continue, as they always do and if the SET/MAI price corrects the stock prices will unevenly weaken but the dividends to come in April/May will not be affected and so the above average income continues. But, if the market keeps climbing “the wall of worry” and moves unevenly higher, it was so ever wise to just hang in there. Viewed in this way at some point in the future, it will have been wise to just hold-on, through all the ups and downs. The alternative is to forever be a schizophrenic investor and miss most of the big moves or worse always, buy high and sell low.
Remember, weeks, months and years ago they told us the similar things…the economy here as elsewhere would not recover so quickly, the current government wont’ last, the currency will weaken ect…But by not getting side tracked and by remaining diversified and with good information at hand, today more then a few members have in some cases very nice percentage gains on top of the high yields, as compared to alternatives.
Look at all the real opportunities lost over the years, by constantly staying on or near the sidelines awaiting for “a better time to invest”. And when that time ever comes, stocks are by then already expensive and so near a correction. Or to at times just sell everything out, only to buy back in later, but perhaps at higher market prices? This action, through the near impossible task of attempted market timing, is often a fools game. Where you look good for a while, only to then under perform in time.
The known uncertainties today are likely already priced into Thai stocks and are the reason why they trade at a hefty discount to the region. The known uncertainties mask the reality that high current income, during the for long already low interest rate environment, is a highly attractive feature, even if the principal fluctuates. The fluctuation in one’s held portfolio value, is not really very important when you think of it, unless this capital is possible needed on a short term basis. But assuming investors always have some cash on hand for emergencies, most people do not have a realistic need to have “on call”, all or a huge portion of ones savings. To insist on it anyway, is an imbecility which costs’ one dearly over the years.
So what is one supposed to do then when some choices soar in price and one has a nice paper gain? 
You have 3 choices depending on your temperament and investor style.
1) You just hold on, realizing it will in time probably still go higher…even if in the nearer term there is a price correction.
2) After a nice price rise, you decide to take a smaller block of your holdings and attempt to trade it. I.e. sell on price spikes, and buy back on price pull backs. Fully realizing this takes time and attention -and that you may loose the position if the stock rockets even higher, before you bought it back.
3) The third choice is to just sell out and realize the profit -because you are happy with the gain made regardless what happens next. And because you have other good stock ideas on hand which you believe now have even more relative merit. In other words, “nobody ever went broke taking a gain” and there are other stocks you follow/know well which now relatively look even better.
The third choice is the toughest call/decision as stocks often, when awoken rise much more then we tend to expect. Sometimes other choices don’t move for a good reason, most of all you don’t want to sell out all your winners and hold or buy more of the laggards, because in time you will have a portfolio of laggards! J
I can’t give you much guidance on which of these to employ as surely it depends on your own circumstances, your investor style and personality i.e. your balance of fear/greed interaction.
The third one being the most dangerous even while often a tempted strategy. My own style is to at first let the stock run some, don’t be the first to take profit…even if it means later it was a false start. So be it. As so often woken-up stocks move more then believed by the early birds. Then, after a while I will take some profit on just part of the whole position with the idea of buying it back at a lower price. If I miss it, so be it as I still have the large portion on hand. If it works a few times, i.e. on selling out some and buying it back cheaper, it can substantially increase returns over time. It is this mix which has over the years produced substantial -even while uneven- returns. And all regardless of the various crisis endured.
Realize as well that mixing smaller cap with some large cap choices substantially reduces volatility and you are always here advised to diversify your stock holdings. I hope these comments helps members at this dire time, as they always are, when once again a few of our core choices have woken-up to higher levels.
Best Regards,
Paul Renaud.
PS. Our server says here is the 1000th article I here uploaded. Let it be so noted by that!
