First Taste of Recession?

Having being fresh out of the oven from 9 months of investing, I finally got a mini bite of how a bearish stock market is like.

For the first time, I opened my MySGX app and all the stocks were red!

Only on Friday, things started to become slightly optimistic and recover again. Can this is considered a correction? But it only lasted a few days…

How did my portfolio do? Time weighted returns are negative, and underperformed the STI. -1.46% against 0.03%. I am actually doing badly in 2018. That’s not very nice.

Indofood Agri dropped 5.57%, and the other two red counters are SGR and CDG as expected. Surprisingly, my small cap counters like Keong Hong and Tat Seng Packaging were going strong. They are far from being in the red.

What to do now?

For me, I intend to leave the stock market with all the action for awhile and stock up on my knowledge instead. I have been studying about the GFC that happened in 2009. It is said in some articles that the next recession will be even worse because of the leftover debt. Since then, many people are still suffering from the consequences – unfortunately, some of whom I know personally too.

I find it extremely ironic that governments have been encouraging people to be financially savvy when their own country is in a debt that can almost never ever be cleared. The growing debt makes the entire economy sicker and sicker by the minute.

It’s so simple. The secret to being financially well no matter where you are in the world is just to spend lesser than what you earn. Yet, this cannot be achieved. It is when compounding interest becomes a pain in the ass for these countries since their GDP will always be lower than the amount of debt that increases year on year.

On the contrast, many millionaires were made because of this huge dip in the markets. Those that were well prepared naturally reaped what they have sown many years ago. That is why having a war chest is important. It can help us to stay sane knowing that we have another back up plan should things turn sour.

So yes, I will be stocking up my war chest still, and be disciplined enough. Either sell, or only buy during recession. That is my way of staying sane. And also to minimize my losses.

Of course, I have never experienced this first hand before. Talk is cheap. Someone who has personal experience of the GFC will be able to comprehend this better. I hope that if you are one of them, you were the one who took that event as an opportunity and would be prepared for the next recession again.

I wonder if history will repeat itself once more. What do you think?

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Author: Miss Niao

Hello! I blog about financial matters and things that average people can do to have a better retirement. I want to inspire people to take control of their money and have a better understanding about it. If you are interested to know more, follow me @ missniao.wordpress.com! :)

11 thoughts on “First Taste of Recession?”

  1. Hi 👋, well this is a small correction. We are not in “recession” yet but this could be a start of “deeper” correction. The rebounce we see may not be sustainable if the companies cannot deliver the returns expected by shareholders like you and me. Some call that kind of rebounce “a dead car bounce”. In a deep correction, You will then see a more persistent decline that may go to 50% from the peak and may last months or years. Well, flip it around, it’s an opportunity to accumulate shares of high quality companies. Having said that, Every correction is an opportunity. Good luck.

    Liked by 1 person

  2. We’re far from being in a recession … if I have to guess, the nearest one is still at least 1.5 years away.

    This was just a profit-taking event, exacerbated by extreme short vol derivatives unwinding, extreme “dumb money” positive sentiment, & too many new money rushing in Jan.

    Well … buying only during recession is a strategy … but sometimes you may have to wait very long e.g. from 1986 to 1997 or from 2009 until now…

    Those who started learning investing in late-1990s & early-2000s were “lucky” to have tuition in severe & prolonged bear markets & recessions early in their investing career … those years felt like being a punching bag … or like serving NS without ORD date. Those who absorbed the lesson developed strong risk / money management skills & avoided the great crash of 2008 by coming out of the markets during Oct 07 to Jan 08 when stocks were breaking down.

    They were the ones with the stockpiled ammo who came back into stocks when STI had cratered -60% or when they noticed that STI was working its way up from its basing pattern from Feb-Apr 09. These were the Gen-Xers with $500K-$1M war chest that managed to turn into $1+M to $3+M and quite a few opted for FIRE or part-time / casual work life.

    I also had a couple of colleagues who kena bitten too hard by AFC stock crashes & they swore off stocks, but saved hard and put their money into tenantable properties during recessions of the early 2000s and in 2009. Also a viable option for building alternative income streams.

    Liked by 1 person

    1. I love your analogies. They make your comment more relatable.
      Yes, I agree that the majority adopt two main income sources, namely stocks and property.
      They took their chance when opportunity arose. 🙂

      Like

  3. One of the worst comments I’ve read. “just have to spend lesser than what you earn”
    If you’re smart, you would have guessed sometimes, people have no choice. Not everyone is born with a healthy family or financially secured life. Also, there’s such thing called fixed expenses, which minimally u must spend in order to live. Have u seen how much a cleaner earn? How can you say they didn’t save enough, simply by denying the truth that their wages are not even high enough!

    Must say your view is extremely myopic almost to a childish, even a sense of hatred, standard.

    Like

    1. hmm.. I think you’re being too extreme here and may have misunderstood what she’s trying to say.. it IS indeed the simplest solution, she didn’t say it’s the only one.. In life no one solution fits all, and sadly the reality of life is that we all have different difficulties.. the simplest solution for some may be toughest for others.. All in all its a matter of perspectivr and circumstances.. Cheers! 🙂

      Like

  4. Hi Miss Naio -this is all good experience for you to have, especially early on in your investing life!

    Funnily enough, just days before this little dip, I wrote a post about ‘Facing Your Fears of a Financial Market Free-Fall’ – about how I approach and prepare for these events (can I claim I predicted it??). If you’re interested you can have a read:

    http://fullyfrankedfinance.com/2018/01/31/facing-your-fear-of-a-financial-market-free-fall/

    Keep stocking up on that knowledge, you can never have too much!

    Liked by 1 person

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