What makes you think you can find the market bottom?

I heard the stock market will go lower. I saw some bad news on interest rates. Correct?

I heard the economy is not doing well, are you sure its time to invest?

These are common questions….

Nobody likes to lose money.

The ONLY way avoid losing is to find the market bottom. Correct?

But how to find the market bottom?!?

Firstly, let me show you some examples of financial news articles

From 6 OCT 2008

“This is markets in pure panic mode. The financial system is seizing up,” said Peter Dixon, strategist at Commerzbank.

Another Monday, another banking crisis,” said Manoj Ladwa, senior trader at City firm ETX Capital.

 

Absolutely nerve racking right? These experts sound convincing don’t they?

 

Wait there’s more from news around that period

“Just when the market thinks it has found a base level, there’s another jolt to the system and we lose another 200 points off the FTSE 100. Black Mondays used to be a once-a-decade event – now they’re coming along more regularly than a London bus.”

 

Found a base level?

I did some research and indeed, the index looked like it hit a potential market base level around that period. After all, it had been 10months of bear and >30% decline. Some gurus may have been suggesting that the market is cheap.

If you reacted to the news and wanted bought some to trade up for the short term, good luck.

-50% for you over the next 6mths!!!

 

 

Even if you decided to keep, along the way, you would have to endure these….

More depressing news in Dec2018.

1) The only thriving part of the credit markets was government debt. Investors desperate for safety poured money into Treasury issues, particularly short-term bills. The yield on the three month bill plunged to zero

2) Wall Street’s crash in 2008 didn’t come in one day like the famous 22.6 percent plunge of Oct. 26, 1987. In many ways it was more nightmarish than Black Monday because there wasn’t a quick end to the selling and record volatility.

3) Wall Street is hoping for signs of recovery by the second half of 2009, including evidence the housing market has hit bottom, increased lending by banks and a drop in unemployment accompanied by increased consumer spending.

But for the near future economists and market experts predict more bad news.

 

How to hold on to your equity investments???

Were the gurus wrong that 11,000 on the index is cheap?

(Josh Tan: Actually on hindsight today which is 10years later, 11,000 is indeed cheap) 

 

Conclusions: NEWS articles are an extremely poor source to find out on market bottoms. They are best at explaining what has happened yesterday!

 

Proper investment advice and generally what we do!

These are wise comments from the blog post below.

As we have noted before, stocks historically, have produced returns of 10% on an annualized basis. Should equities continue on their long term historical path, we would suggest that stocks are likely to out-perform these other asset classes over the next decade. The 1970’s, which included a decade of relatively poor stock market returns, ushered in 20 years of significant outsized returns for the S&P 500 during the 1980’s and 1990’s. While investors would rather that stocks produce more consistent results, we are optimistic that the low stock valuations seen today will lead to positive results over the next decade, as the future is not likely to not resemble the past 10 years.

 

 

So, if you want to find the market bottom, you should give up that idea now.

That also means that you and I will never be able to avoid losses totally.

It is what you do when you are experiencing losses and how long you are prepared to invest that matters the most!

That is the real juice of our advice.

Look for us if you want more success in your investment journey.

 

Josh Tan Jian Liang (CHFC) Principal Author

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