Friday, August 3, 2012

investment strategy

What is my investment strategy

1) Enough cash set aside for a bear market

  • How much cash is enough?

  1. There must beat least 2 months cash set aside for emergency

  2. At least 30% of investment money should be in cash unless all definition of bear market is fulfilled

  • How do you know its a bear market?

  1. A correction of more than 20% has taken place

  2. VIX hits above 35

  3. Counter hit historical low in terms of price.

  • What to invest in a bear market?

  1. blue chip companies that give a yield of above 6%

2) Invest in high yield instrument that can give a sustainable yield of 7%

  • How to measure sustainability?

  1. check company performance over multiple business cycles. Where is the company at now? Has company seen worse time and survive?

  2. Peer comparison, how did company do compare to others.

  3. What is its financial status? debt level, brand name, pass red flag test??

3) What is my problem?

  • Lack of cash

  1. stock up on cash instead. Bear market definition not fulfilled

  • Poor cash flow

  1. Increase cash flow by $50 per month, and then by $200 2013 onwards

  • Money already tied up in the stock market

  1. Exit profitable counter that doesn't fill your portfolio

  • Poor portfolio management. What is the composition of your portfolio?

20% - speculative penny or mid-size counters to seize market opportunity (Anchun + foreland)

50% reits or trusts or high dividend companies of high dividend yield for at least 2 years. (HpH + UMS)

30% Blue chip companies that have yield above 5% (None) (Banks, mid-size property, SPH, telecom, utility?)

Be patient, take baby steps to correct mistakes, keep a log of why you buy or sell a company.

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