Monday, February 6, 2023

I Feel Good, Or Should I?

In the month of January 2023, we had seen the markets reversing itself after the doom and gloom that ended the year of 2022. To start off, for year-to-date (till 3 Feb 2023), the S&P 500 had recovered around 8.2% and the NASDAQ 100 had recovered even more at 15.7%. Our local STI, while being one of the better performers for 2022, had gained 4.3%. To add, our local S-REITs (using the iEdge S-REIT Index) had seen a rise of 8.5%. Just a few days ago, the Federal Reserve had announced an increase of 25 basis points, which was lower than the previous hikes, indicating an assumed (emphasis mine) pivot position by them.

With all these happening, it is easy to have the impression that the good times are rolling in again, and all the talk about doomsday and recession effects would be dampened, if not, very optimistically, non-existent.


Depending on who you had read from or listened to, there is still a range of outlooks with regards to the coming times, ranging from those that emit ultra-positive vibes to the ones still giving the dreary-looking auras. However, as always emphasized, the future is difficult to see. Who is right and which is accurate, no one knows for sure, and only time will tell.


In the meantime, it is easy to be drawn into this current market excitement and the feeling of FOMO (fear of missing out) is strong especially when share prices are going up. The first reaction to these is not to have any reaction at all. Getting carried away is the last thing on your mind, and instead take a step back and focus on what is at hand, i.e., your investment portfolio.


To me, maintaining the balance of our preferred asset allocation mix in the investment portfolio trumps all other things, being a believer of diversification. This might be a good time to take in the current values of the assets, financial instruments and securities, and see if rebalancing is necessary. Rebalancing does not necessarily involve buying and selling with what we have, and we could add in additional capital to carry out the rebalancing with our capital prepped for injection into the portfolio.


The next question is what to get. There are two main ways to go about this: the first is to see which asset classes, regions/countries, sectors/industries and/or companies are “out of flavour and favour” for the moment but there is a very strong chance of them turning around, and we could channel the capital towards them. The second way is to do an averaging up, especially on individual counters; this may sound a bit of a paradox of my advice not to go FOMO but there are some counters’ prices, though rising, are still probably within your “buy” parameters, e.g., the counter is still below your calculated valuation, there is a potential growth in the sector of which the company is in, etc.


For passive investors and those who carry out dollar-cost averaging (DCA), just maintain your course and continue to do the necessary in your investment journey, i.e., carry out periodic rebalancing according to your schedule, and/or keep on contributing the same amount per period for your investments.


Keep calm, stay safe and stay invested.

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