1) Enough cash set aside for a bear market
- How much cash is enough?
- There must beat least 2 months cash set aside for emergency
- 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?
- A correction of more than 20% has taken place
- VIX hits above 35
- Counter hit historical low in terms of price.
- What to invest in a bear market?
- 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?
- check company performance over multiple business cycles. Where is the company at now? Has company seen worse time and survive?
- Peer comparison, how did company do compare to others.
- What is its financial status? debt level, brand name, pass red flag test??
3) What is my problem?
- Lack of cash
- stock up on cash instead. Bear market definition not fulfilled
- Poor cash flow
- Increase cash flow by $50 per month, and then by $200 2013 onwards
- Money already tied up in the stock market
- 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.