What Should Be the Stock Investment Strategy Now?

Greeting to all my readers.

I know some of you might wonder what I have been doing for all these while.  Well, I am preparing my second book and it is expected to be released by 1st quarter of 2013.  My second book will share more information on investment and financial planning.  The aim of this book is to show you how to enjoy your life without worrying money.  I will keep you informed via my blog for the release of my 2nd book.

Since the release of my first book, "Infinite Wealth", I have been receiving a number of positive feedback from my readers.  Taking this opportunity, I would like to thank all my readers for your support and I will strive my best to share my experience to benefit those who need it.

With the above mentioned mission in mind, for this post, I would like to share some of my thoughts on what should be the current stock investment strategy.


FBKLCI keeps making its historical high.  This also means the price of index-linked counters are sky-high.  A number of my readers are asking me for my comment on whether it is still the right time to enter.  Well, technically speaking, if you are using my Process #2 in "Infinite Wealth" to determine the entry, it should be still fine.  BUT, it will be better if you could consider further in macro way.  That is：

1. how is the general stock market now?
2. how is your stock holding now?
3. what is the probability of the stock market to move up further?

For question 1, to me, the market is too high to enter now.  My suggestion is to enter only after sharp adjustment as, provided the counter is actively traded, it will sure go down with the general downtrend market, no matter how strong the fundamental the company is.  However, I do not know when the market will go down and I really don't bother to predict it.  What I do is to get the general personal (NOT the public or any so-called professional) feeling.  If you can do that, you should be able to determine the right timing to enter with the help of my Process #2 in "Infinite Wealth".

For question 2, take sometime and study carefully your current holding.  Is the costs of your current holding are very close to the market level?  This could happen only when you bought stocks recently (at the high side).  Again, reconsider those points I highlighted in question 1 to determine your next cause of action, i.e. to continue buy (accumulate) or to sell (to reduce risk exposure).

On the other hand, if your holding was done during the last crisis time, congratulation, you may consider to keep you holding.  In case of market goes south, it will be a great time for you to accumulate more quality stocks.  Please do note that this scenario is only applicable to those who are buying good quality stocks.  Process #1 in "Infinite Wealth" will assist you to identify good quality stocks.

For question 3, when a market has been moving upwards for quite sometime, will it continue to move up or going to adjust down?  Nobody in this world could give you the answer.  No matter what, we need to prepare for the worst at all time.

Therefore, my personal opinion suggest to stay at the sideline for the time being.  If you insist to invest, buy REITs (Real Estate Investment Trust - You may refer to my previous post on REITs for more details of how they are operated).  Select those REITs with market prices lower than respective NAV and are paying dividend handsomely.  Buying REITs, to me, is a conservative way to invest in stock when the market is high.  Why?  Firstly, buying REITs at a cost lower than its NAV means that you are buying good properties at discounted price.  Secondly, high dividend payout will effectively reduce your investment cost which, in turn, reduce your investment risk.  Normally, counters with high dividend payout are the most prefer stocks during market downturn.  Hence, REITs prices might go south but not as drastic as other equities.  Furthermore, lower REITs prices during market downturn will mean you can buy good properties via REITs at even more cheaper price.  Isn't it great?