In 2020, we, investors, went through a series of punishment in every shape and form. Right before the pandemic, we experienced the uncertainty caused by Trump and China. Right after a brief moment of happiness when phase 1 of the trade deal was signed, the Wuhan virus strikes us all immediately and the global shutdown began. In retrospect, I think my level of self-doubt hit an “all -time-highs” (pun intended) but what mattered the most was how I kept myself sane and made the best out of it. Anyone looking back will have no difficulty saying that buying (stocks) a few months ago was the best choice to make but I can assure you that it did not feel nearly as similar in reality at that point in time. In this post, I will be sharing the most heartfelt lessons I went through as an investor in 2020 and how I could have done better.
Buying low sell high did not make sense during the market crash
The buy low sell high saying is untrue when you do not know where the low is during a market crash. Simply put, each time you feel you are averaging down, you lose another 3-5% in the next few hours. How is that a good feeling and how can you continue to average down when every stock you have on your watchlist continues to crash. At some point, you will feel like all hope is lost and that you should just wait from then on. That leads to a tremendous amount of fear and doubt and this often happens right before the market rebounds. This is a common mistake and a painful one because the market will always be able to make you feel bad. As investors, you should plan ahead and execute as planned. Do not contradict your own plans when prices fall quickly. Expect the unexpected and plan for contingencies. If not you will be caught off guard and will be too overwhelmed to take any further actions.
Never feel optimistic during a market crash
In June, STI climbed aggressively by around 15 to 20% in a few days, and during that period, there was a wave of optimistic comments made about a V-shaped recovery. However, that spike was short-lived and many people who did not sell experienced a great loss as the market retreated back to the lows several times. My decisions then were made with caution as I took every target price very seriously and executed it promptly when it hits. That allowed me to extract profits and cover some paper losses caused by the crash. Within a few months, I managed to recoup some of my paper losses even when the market was still consolidating sideways.
Do not jump boats for the sake of greed
Every stock has its ups and downs hence, there is no reason to jump boats to ride on another stock’s rally. The reason is simple, as it might backfire if there was going to be a trend reversal. This sounds elementary but many investors love to ride on the wave of a greed-rally, little did they know that by the time that particular stock is in the limelight, it will be extremely difficult to make substantial amounts of profits due to two reasons. Firstly, the price of that stock is already high and secondly, a correction will happen without warning and that might cause you to sell at a loss before it rebounds. Bottom line is to stick to your original list of stocks and staying objective so that you will not be swayed when the market tries to throw you off your game.
Closing Thoughts
To be a successful investor, one must ward off all unnecessary noise and focus on the facts. One of the questions that I asked myself repeatedly was. “Is that dip in share price justified?” Apart from that I also learned about the true meaning of paper losses and knowing how to stay sane during a downturn. Lastly, to find reliable sources or mentors to keep you on track. On that note, Loopholes Singapore tried to be there for you guys throughout the year, and however small that impact is, we hope that you have grown with us in this journey as an investor.
