Whenever we do our shopping, be it at a retail mall or a stock market, the first thing that should come into our mind is the price reasonability versus the product. In other words, I am justifying whether the price is a true reflection of its value and potential benefits this product can reap. Do not be a blind shopper, where you sweep everything that you can afford into your basket.
The recent STI performance has been quite muted (hovering between 3000 to 3200), with any gain be quickly subdued by subsequent losses. Under this market condition, buyers are caught in a dilemma of whether if they should enter the market or wait a bit longer for a ‘cheaper’ price, bearing in mind that any delay will result in your money sitting in a bank, not working hard enough for you.
The Risk of Reckless Buying (In Singlish = Anyhow Buy)
It kind of scare me when I read an article, ” Danger Lurks as Investors Seek Yield”, under Wealth section, The Business Times, dated 3 May, where it reported investors are turning to lower quality bonds/assets as they are desperate for yield in a cash rich yet with limited availability in the market.
According to the article, it reported that money has been poured into mutual funds that invest in bank loans, often low quality ones and to a lesser extent, it has gone into buying bonds rated below investment grade, known as junk bonds. This posed a potential danger to our capital money as low quality bonds are more likely to default. Despite market guru like Mr Fridson, Chief Investment Officer of Lehmann, mentioned ” the next upsurge in the default rate” was likely to begin in 2016 and going to last for four years. The face value of bonds and loans going to default can amounted to near US$1.5 trillion, investor are still poured money into such investment medium.
If what the analyst said is going to be true, then it will going to be another painful experience for us, investor to face with another market turmoil.
The Reasoning Process
No matter you are cash rich or not, when looking in investing into any of the instruments available, please stay rationale and have a bit of scepticism do help at times. You should understand what your investment goals are and your risk appetite. This is follow by buying any investment product that fits both your goals and risk appetite.
Do not be greedy or “kiasu” (singlish). Like what Richard Brandon have said, “Business opportunities are like buses; there is always another one coming.” Therefore, take caution and do not rush into pouring your hard earned money away.
There will be times when you will buy in a market when it is not deemed to be cheap. For example, currently SREITS is giving an average yield of 6.634%, not really high (considering the potential risk such as interest rate hike, currency depreciation etc.) nor really low (compared to bank interest of barely 1%). As long as you are clear about your goals and objectives, you can take the necessary actions and stock up.
I shall leave with you what F&N’s Chief Executive for non-alcoholic beverage, Mr Ng Jui Sia, views about buying business and expanding. Hopefully, you can resonate to what he said, like what I have enlighten from his wise words.
” When the deal is available to you, you have to make the decision. You cannot peg it to a history. You have to make a decision whether it fits your purpose, it fits your strategy, and is the target available. But we are not saying you must always buy low to sell high. We never sell high. F&N has never sold any of its businesses (willingly).”