Friday, 8 January 2016

14 year-old Son to Me: "Stocks Move In Cycles, Mama!"

I was sharing with my 14-year-old son just yesterday how stocks are all going downhill and it seems that everything was "doom and gloom".  He then reminded me, "Stocks move in cycles, Mama!"

I was frankly, quite surprised at his quick "retort".

He then recounted when we were staying in China a few years back, I had a historical chart of the Straits Times Index pasted on the wall of the study room we shared.  On it, I had written the words, "Stocks Move in Cycles!".  Little did I know that the young boy then had also this picture nimprinted in his mind. It was really meant for the mother to brace herself to pick up cheap but good stocks during the financial crisis when stock prices kept falling.

The scenario is repeated these days. Just flip through the newspapers and you'd see the pessimism spreading, with headlines like the "China triggers stock sell-off", "Shares enter bear territory", and "Uncertain year looms for Singapore".

Of course, the boy knew nothing about stocks.  But he had a certain blind faith that may be lacking in me now.  I went and printed out the historical STI chart below:


Just look at the STI trend.  As someone who is investing long-term, it would seem to be but a dip in the larger scheme of things.

Will it dip further?  Will it recover soon?  Frankly, who knows for sure?

Here's another picture:

The Investor Cycle

I believe we have gone through the "pessimism" stage and entering the "panic" and "capitulation" stages.  This is the golden opportunity for long-term investors, provided one has the wherewithal to hold it out.

So, I am continuing my strategy to buy good companies which give good dividends and to wait out the dip.  The best "advice" came from a fourteen-year-old, not any analyst report.

But first, let me paste that chart with the phrase, "Stocks Move in Cycles!" written in big bold letters on my notice board!

3 comments:

  1. Your article comes at the right time. I would still buy SLOWLY...

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    1. Hi Cory! Yes, same here. We do need to look beyond this period to see the light at the end of the tunnel!

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