Before this bear market started, I was actually pretty confident of being able to stomach a drop in my portfolio as I have been investing for quite a number of years and I have been through quite a number of occasions where my portfolio drop by 30% in previous occasions before rebounding back to positive territory.
As such, during this downturn, I have started to nibble on stocks once STI dipped below 3,000 and only buying on days which my targeted stocks or STI are red. If you think about this, we have been conditioned to respond in this way since the stock market has been doing quite well or trending sideways for the past decade and any corrections represents a good opportunity to buy. I mean if you flip a coin and it lands head for the past 10 times, we have been conditioned by previous instances that the next time will be head as well and we would go long on head even though logically, there is only a 50% chance of getting a head on a flip.
However, I think too highly of myself as on the day DJIA dropped by 10%, I had this emotion of like a 'deer being caught in the headlight'. This emotion was unexplainable and it was not due to the drop in my portfolio but more of the huge increase in volatility whereby swing of 5% is becoming very common and the velocity of the drop. On that day, I've decided to cope by refraining from watching any news and stock market indices for the next few days.
The next thing that I did and which I would encourage you to do so, is to surround yourself with like-minded investors. I promptly set up a Whatsapp group with like-minded investors who buy on value and downturn and it was much easier to cope subsequently. This is because as humans, we are subjected to emotions. When the indices turn red, we are fearful to buy as we are afraid that it will drop further and we would be catching a falling knife but logically, we need to buy because it means the stock that you have been targeting just got cheaper. When the indices turn green, we want to buy in as we are fearful of missing out i.e. FOMO. It is important to have a support group during these times.
The other thing I did was consolidate and revisit my plan and stick to it. On hindsight, I've started to nibble too early in this bear market and have use up more of my funds that what I would have like to. Thankfully, my job is pretty secure at this moment and it is considered to be a industry which provide essential services and products by governments around the world in general. Moving forward, I will be doing a DCA approach i.e. buying a fixed amount at the predetermined day on every month for the rest of the year. No one knows where the bottom is but this strategy should ensure that my entry price is near the bottom and spare me the emotions of buying since the buying dates will be fixed on every month.
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