Perhaps Too Panicky?

After a week, the market seems to have recovered with the STI at 3182. On hindsight, I may have made silly decisions to liquidate around 50% of my portfolio into cash. If I have not sold during the crash, probably my current portfolio would look better when the market recover.

At the end of last week, I have taken steps to re-build my portfolio by buying into the stocks I am still holding and a new stock holding. This somewhat relieves the pressure of underperformance when the market is or seems to be recovering. And today, I have further added on to my holdings. I’m not sure if buying now will be correct in the coming days or weeks.

It is very difficult to act on foresight and easy to evaluate on hindsight. I do not mind the heavy liquidation done last week as I would not have known if the market would continue to correct or not.

Furthermore, I do not believe in technical investing. Or to put in another way, there is no solid logical ground showing that technical investing will outperform the market over time. In any case, any brilliant performance in one period may just mean that the investor may be very lucky in that period or the investor’s strategy is very well-suited in that period. In the long run, however, it may be a different story altogether.

Perhaps, I am being to kind to myself in not re-examining my liquidation decision last week. And most likely, I would not liquidate as severely as I did last week when the next correction appears. Nonetheless, I believe that I should at least liquidate a little during corrections so as to take advantage of the low prices in other stocks if the situation arises. In addition, the liquidation would also help me in re-positioning my portfolio.

Yet, liquidation is costly as one can miss out the unexpected market recovery with certain transaction costs. Therefore, perhaps it may not be ideal to do heavy liquidation but a little liquidation may not be that useless or bad, after all.


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