We are now in a severe bear market. The stockmarket around the world has dropped more than 20% from its recent peak. The drop can be 5% a day. It can drop a few days in a row.
This is the work of hedge funds. When the market is weak, they sell in large volumes, causing weak holders to panic and sell their holdings. There are no buyers, so the drop is severe. Later, the hedge funds will bear back their short positions at the depressed prices and make a profit. It has happened on many occasions in past years, during bear markets.
Long term investors should not worry. This short term massive selling last a few days and will stabilise or recover. In fact, this is a good opportunity to buy stocks at extremely depressed prices.
Hi Mr. Tan,
ReplyDeleteI agree with you. My portfolio is now in the red but I'm not panicking. It may take years to recover if there really is a recession but it's also a good time to buy value stocks at cheap prices.
Cheers!
Derek
No offense. But if there are no buyers, who are the hedge funds selling their holdings to?
ReplyDeleteHi Mr Tan,
ReplyDeleteI am currently holding onto blue chips like SGX and OCBC. They have since lost 25% and 12% respectively. What's your opinion on them?
Hi dude,
ReplyDeleteI am also holding onto OCBC shares at the moment. I bought it when it was at its lowest around 2 weeks ago. But now, it's even lower. IMO, OCBC is a value stock and it should be able to grow in the long term.
In fact, all blue chips have since drop quite a bit for the past few weeks.
Hey all,
How long do you guys think the bear market will last this time?
Regards
Loh Hon Chun
In the short term there will be fluctuations. Short term can be 2 to 5 years with the index moving up and down. But in the long term say 10 to 15 years, the trend will be up. It is a zigzag trend over short term but upwards trend over long term. Just study the trend chart and be extra patient.
ReplyDeleteBush's stimulus plan didn't work. It was dismal and not potent enough to lift up the drooping economy just like those fake viagra. However , the situation offers plenty of buying opportunities
ReplyDeleteIt is a fantastic time to rebalance your portfolio.