Remember the LORD for it is he who gives you the ability to produce wealth and so confirms his covenant... Deut. 8:18

Saturday, September 3, 2011

Banks downgrade. Hedging. Telco.Gold.

Despite the pretty good earnings of the banking sector in Malaysia, there is a general downgrade on the banking sector by most analysts. While I'm still upbeat on some of the bank stocks that pays pretty good dividends but I can't help noticed the selling pressure on CIMB which has influenced share prices of other banks. So I have conceded to the trend of Mr. Market and reduce my holding of banking stocks.

It's darn tough to trade in this treacherous condition but here's what I think you can do if you're experiencing some monetary losses in your current position and looking to recoup a loss (by hedging) and/or are looking for a potentially rewarding trade, on a SHORT TERM strategy or a LONG TERM one.

1.)... Look for stocks that're trending upwards and buy on dips... The only sector that's on my list is the telecom sector.
You may even have your own idea of sectors and stocks that're on the uptrend. You may check with your financial consultant, brokers for some recommendations but the decision to buy remains YOURS, and yours alone.. If in doubt, DON'T buy. Coz you cannot lose money further if you don't buy in..

You may buy stocks that're tanking, pray for a technical rebound. That's your prerogatives but never my liking (I've learned by paying my dues/ for my lesson to Mr. Market ). It make more sense to buy blue-chip stocks that're rising in share prices than dumping more money in losing stocks.

The idea is to hedge yr current losing trades by taking a position in several potential winning trades. And if your winning trades equalise your losing trades in monetary terms, it's time to quit the market... The idea is not to make big gains but minimise your losses and quit the market. Repeat --- Quit when trades equalise...!

2.)... Exit the stock market and invest LONG in precious metals IF you seriously believe we're in for a crash/collapse in the financial market.

I'm not the smartest gold investor around but this is what you can consider. Set up a precious metals fund equivalent to 10 - 20 % of your portfolio. Start by taking a small position, say 10% of your intended precious metals fund, at around this time, with prices hovering around USD 1,800/oz. Buy with another 40% of yr precious metals fund if gold price dips to USD 1,500 within one month and another 50% if it plunges to USD 1,200/oz within three months..

Patiently hold yr investment to 4 - 5 years and dream on for a USD 3,600/oz by 2015...? I guess it would be fair for me to take a position and post my gold investment gain/loss on a three month basis up to 2015. It would be interesting to prove the "gold bugs" story...
Forgotten are my minute gold investment in physical Gold Maple Leaf 1 oz in 2009 (?) when price of gold was at its highest hovering around RM3,300 and my 1 oz silver American Eagle was purchased at USD 16..
Happy investing...

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