Thoughts on 2017, Part 2

Everyone is positive on 2018's returns

I looked around at other people's view of 2018. Most, if not all, feel that 2018 will be a positive year but the returns will not be as good as 2017's. 

I also feel that 2018 should be positive for stocks. But I am more cautious when everyone feels the same way. Usually when everyone feels the same way, things will turn out different.

Hedging against errors in viewpoint

It is possible that my views may turn out to be wrong. E.g. I did not expect 2017 to be a such a good year for stocks. Hence, one may need to hedge against the possibility of having wrong viewpoints. 

For investors, hedging against wrong viewpoints can be done by 
- having margin of safety in buying stocks 
- having fixed stock-bond/cash allocation 
- selling half of stocks when stock rise 100%.
- diversification i.e. having more stocks in your portfolio. 

Re-learning my selling rules

This year, I have not abidded my selling rules faithfully. When bad news hit a stock, I should have sold 50% or the whole position. Instead, in one instance where a profit warning hit a stock and the stock fell to $1.50, I decided to wait for more details on why the profit decline. In the end, the stock dropped further and I sold the whole position at $1.20. 

In 2018, I need to learn to sell more ruthlessly when bad news hit. 

Lower expectations on yield of reit

Two years ago, I will need yield of reit to be 8%-9% and potential for yield to grow before I become interested. 

Now, I am buying Fraser Commercial Trust which yeilds less than 7%. It is harder to find reits with higher yield, except industrial reits. And I have some cash to deploy into stocks. Lacking in stock ideas, reits is an acceptable 'placeholders' to put my cash in.