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Market Volatility Is An Investor's Best Friend

This year has been one hell of a ride. From my experience, it is one of the most volatile years that I had seen.

Let's take a look at this week for example.

Of course, it is a common sight in the stock market to have very different headlines in a short span of time.

Yahoo Finance Chart

To have a 30% drop in one year and recover the bulk of it within the same year is a rare sight.

Many of my friends asked me how I overcome the huge rise and fall of the market. I mean seeing the market going up is easy when you see your investments in the black.

The other direction, however, doesn't sit well with many investors.

Here are some guidelines I follow to help me overcome the market's anxiety. Hopefully, the guidelines can serve as an aid for you too.

  1. Invest in companies you believe in.

  2. Size your positions.

  3. Check less frequently when the market drops.

  4. Don't read the news.

  5. Instead of focusing on prices, focus on the value points.

Allow me to dive into each point so you get a better picture.

1. Invest in companies you believe in.

I always dig into the companies before I plow my money into the market. I find that I can sleep better knowing that I'm passing my hard-earn money to a good management team, that is working day & night to grow my money.

Rather than punting the market, trying to identify the low and high, I prefer the less stressful approach of finding good companies, Even if a recession hits, the likelihood of people using services from Amazon, Google or serve Facebook will be quite high.

As such, it is easier for such companies to continue their operations in good and bad times. And that gives me confidence. Of course, the financial numbers got to support those assumptions.

2. Size your positions

So that even if the market drops, you know it doesn't affect your portfolio adversely.

My current portfolio doesn't have any on stock that holds more than 10% of my portfolio. Till date, I have 31 US-listed companies, 12 SGX-listed companies and some funds.

As such, when the market was down earlier this year, my portfolio was down abt 20% instead. And I took the opportunity of the market's low to add to the companies i believe in (Point 1).

3. Check less frequently when the market drops

Taking the ostrich approach here. Out of sight, out of mind.

Don't stress yourself over short time losses. Go for the long game.

4. Don't read the news.

Counterintuitive. I know.

But I only click on news that is related to the companies I am keen on or have already invested in. Otherwise, I tend to stay away from the news.

Most news is not very positive or empowering. Life is already difficult. Stop the negative flow.

5. Instead of focusing on prices focus on the value points.

Rather than fixating on the prices, I find that it is easier to buy at good value points.

What do I mean by good value points? To me, value points are valuations like PE, PE, PB.

I first come across this phrase from Tom Engle of the Motley Fool.

For example, DBS (SGX: D05) back on 10 Mar 2011 priced at $11.23 with a Price to Book (PB) ratio of 0.93. On 7 Mar 2016, with a similar PB at 0.94, the stock price was at $15.22.

This is because DBS has increased its book value across the 5 years. As such, even at a higher price point, the valuation still looks attractive.


Investing in a volatile market is never easy for any investor. No investors like to see their portfolio in the red. However, if you sit tight, stick to the guidelines and you should do just fine.

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