Pulling through possibly the worst in KLSE this generation has seen

Since Pakatan Harapan has taken over Putrajaya, they have been hit with quite some bad luck. From the trade war to the COVID-19, we have seen KLSE slumped to a multi-year low. And just when you thought it can’t get any worse, some clowns within the ruling party said, “hold my beer”.

Day after the Sheraton “dinner party”, amid political uncertainties KLSE have slipped 41.14 points to an 8 year low of 1490.06 points. On the scoreboard, losers outpaced gainers 1,015 to 137 with 222 unchanged, 625 untraded and 21 counters suspended. Blue-chip stocks took the heaviest hit, with Maybank, declining 21 sen to RM8.20, Tenaga Nasional shrinking 64 sen to RM12.14, Public Bank reducing 74 sen to RM17.40, Petronas Chemicals sliding nine sen to RM6.36, and IHH weakening 14 sen to RM5.60.

Now, I’m freaking out as my portfolio turns red. What do I do?

As long term investors, what we should do right now is to keep calm. Not having a clear head right now can lead to irrational decision making, which may undermine your investments.

Without doubt that all the uncertainties circulating around the world right now will cause a negative impact in the short-term. But we should not let near-term earnings impact cloud our judgement on the long-term economic value of businesses. Businesses with strong fundamentals can and do recover from temporary setbacks. We don’t have to be worried about short-term price volatility as long as your investments are fundamentally strong, as the long-term economics of the businesses will eventually pull stock prices back up in line with the commercial reality.    

Instead, if we have a strong cash holding, we can be ready to pounce when the stocks market presents us with opportunities to acquire great businesses at beaten-down prices. Contrary to popular belief, uncertainty actually is the friend of the buyer of long-term value. A crisis is an opportunist’s heaven.

But will it drop further?

Unfortunately, it is very possible. Speculations and uncertainties drives the economy down. With the trade war uncertain, US stock market bubble and the only worsening COVID-19, the chances of a further slip in the stock market may be possible.

However, history shows that the market’s negative reaction towards speculations and health crises are often short-lived. The chances of a return in investment is relatively higher than the chances of your investments falling further.

I end the blog with a quote by Warren Buffett,

We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.

All the best, and happy trading.