Lessons learned from the the big correction in 2007/08/09

When market crashed in October 2007, my share portfolio took a very hard hit and when from profit to lost. From a +25% profit, it went all the way down to -60% lost in February 2009. In fact, if I had not continued to buy shares in that period, the lost (from the original portfolio in 2007) would have been even more.

Thank God, as dramatic the fall was, so was the recovery since March 2009. As at 31 December, the portfolio recouped much of the losses and is currently at -6%. If I take into consideration of the dividends collected and others, it would be a +3~5%.

Its bout time to take stock and pen down lessons learned:

1. Cosco. It was my star performer before crisis. I bought the shares at 1.16 and it went all the way up to 8. Believe it or not, I did not take any profit. ON the hindsight, I should have taken some profit at it clearly exceeded 7% of my portfolio. (7% was my set max. of a single stock in my portfolio).

2. Chasing stocks on high price before the crash. That was my mistake. when STI was above 3,500, and warnings have been sounded for a correction, I ignored them and continue to chase stocks which have run up a lot.

3. Looking at my portfolio now, I can see that blue chips recovered very well from the correction. Whereas small and mid cap don't. This shows that small and mid cap are too over-value in the bull market prior to 2007. I have bought them without considering the intrinsic value, and therefore suffer big lost. This is an important lesson. Chasing "market darlings" that has run up substantially is definitely out for me in the future.

4. Importance of dividend payout. The cash dividend I received in the last two year did not reduce very much. It helped me to re-invest and boost the portfolio dring recovery.

5. Continue to stay invested. This is the reason for my portfolio to recover. As market crashed, I had a chance to buy into stocks that were expensive before. And when market recovered, this help to boost my portfolio value.


Going forwards, I shall:

1. Continue to be invested in the market.

2. Go for more defensive counters, since I have passed 50 mark. Go for dividend play to build up my alternative source of income.

3. Continue to diversify the portfolio.

4. Strictly limit the percentage of any single counter vs the total portfolio. No buying in of counter which exceed 7%. If any counter exceeds10%, bring it down to 7%.

5. Only add new counters with good intrinsic value.

** The above are reflection as at Today. They may change in time. Use them at your own risk.

31 December 2009

The year 2009 finally comes to its end. In this eventful year, the stock market surprised the world positively. the sharp V shape recovery of the equity market was never predicted by or foresenn by anyone. Who had expected such a recovery?

The strategy of staying invested and buy into the market when it was down at the bottom paid off. As at today, I haved re-couped all losses from the stock market (taking into account of dividends received). My UT portfolio even shows a +8% profit.

Everyone is saying (or at least many "gurus") that the index will edge up further in 2010. but for me, I intend to go more "defensive"- meaning I will invest more in defensive stocks that pays good dividend. Reason? I have reached 50 and I feel that it is time to go more defensive and generate more alternate source of income.

Back to Dec 2009. STI soar 165.5 points to end at 2897.62 at the end of the year (month). My portfolio value grew a stella S$69,615. This included fresh investment of S$25,525. So effectively I made S$44,100 in capital gain. Besides, I received S$7,500 in cash dividend. I bought Capitaland share (finally got the big C) and top up SPH shares when price dipped after XD. I participated in rights subscriptions in MIT (now AIMSAMPIREIT) and Pteris.

Below are the top 30 holdings as at the end of Dec 2009.

1. SPH
2, ComfortDelGro
3. OCBC Bk
4, DBS
5. ST Engineering
6. Semb Corp
7. SP AusNet
8. F & N
9. CitySpring
10. Starhub
11. SAT Svcs
12. SembMar
13. FraserComm
14. SIA
15. CoscoCorp
16. CapitaComm
17. FrasersCT
18. Capitaland
19. SSH Corp
20. SingTel
21. Yangzijiang
22. AscottReit
23. MetroHldg
24. MapletreeLog
25. Aztech
26. Sp Ship
27. Tat Hong
28. KS Energy
29. ASL Marine
30. SMRT

Comparing the list with that from November, one can see the the market is no longer as volatile. the top 10 positions hardly changed. Capitaland is a new member in my portfolio (bought when price dipped below 4). Mida was pushed down to position no 31.

Exercise Warrants for the First Time

Call it luck, call it blessing...

I realised that I had 2,000 warrants from Transpac in my portfolio, with exercise price of S$1 one day before XD! With the dividend of 40cts declared by Transpac, it seemed too good an opportunity to miss. (Simple calculation: Pay $2,000 for 2 lots of Transpac shares worth $3,800.)

I called up the agent and was informed that if I submit the form and cashier's order by the "record date", i.e. 10 December, I would still be entitled to the dividend. Well I did just that - with help from my wife who works in Shenton Way.

Besides the profit made, now I have a better idea on Warrant exercising.