Lately, in the scope of work, I have been asked for advise for :-
1. Should I sell out everything even though it is at a loss as market might drop some more ?
2. Should I buy or average down now or wait ?
These 2 probably is the most difficult question to answer given the current situation globally. There has been talk about US and Europe slipping into or about to go into recession and Singapore entering technical recession. How true are those ? Answer is neither do we know of until we have hard fact to show that.
What should we do with our portfolio now ? To answer that question I suppose one has to be cleared of what type of investors you belong to.
1. Value investor who based on fundamental
2. Short-term investor
Normally if you are investor of type 1, you should not have those questions in mind. A value investor who invest only base on fundamental usually have no time frame to cash out their investment. They will only cash out once they deem the fundamental of the company can no longer grow or expand. In addition, value investor will only buy when the price has fell into such a cheap valuation. A true value investor's portfolio at current stage will still have profit and they will not come in to buy or add more as valuation is still not at dirt cheap level. In general, under such situation, value investor will not do anything except wait.
If you are type 2, short-term investor then those questions will definitely in your mind. One reason being, you are restricted with short time frame, you afraid you miss the bottom and when stock markets rebound, you will miss out. Another scenario is you are holding a portfolio at a loss with current price level and if you don't average down or add more now if stock market rebound, your existing portfolio still cannot achieve a gain. The fact is short-term investor has already miss the selling point and with current cloudy and uncertain situation, any attempt to average down or add more hoping situation will get sorted out and stock markets rebound and can sell off everything with a gain is basically taking a gamble, a high risk gamble. Firstly, nobody know when stock market bottom up and nobody know when those tackling issues ( from US and Europe ) can be sorted out totally. Keep buying on dip would only exhaust one's limited capital. So what's the best solution now ? Selling point already miss without any doubt and keep adding more only exhaust limited capital and if situation get into recession, you will get stuck more and by then you will be running out of capital to really buy at dirt cheap price. Probably the best solution now is don't do anything and wait for rebound and sell off the portfolio ( with or without gain ). Wait till the whole situation to get clearer then re-start the portfolio again to recover back the loss. This is the disadvantage of investor with short time frame.
So to buy or to wait now really depend on what type of investors you are.
