To Hold or to Sell during this Turbulent Times

As of 12^th May 2022, the NASDAQ has entered bear market, plunging by 28.2% year to date (down 29.2% from recent high in November 2021), S&P 500 has corrected by 15.9% year to date (down 17.4% from recent high in December 2021), and even the less volatile DOW has dropped by 12.1% year to date (down 12.4% from recent high in December 2021).  Singapore's REITs are not spared either, as shown by iEdge S-REIT index, which has declined by 3.5% year to date.  However, a surprising twist is the Straits Time Index (STI), which has actually rose by 2.9% year to date.  Let's see how long more it can remain above water, with DBS dropping daily these few days!

Market seems gloomy with the Russia-Ukraine war, persistently high inflation, FED raising interest rates, supply chain issues, sky-rocketing oil and commodities prices etc.  There are no near term positive catalyst at all, and talks of recession is all over social media.  In fact, the US has already reported a quarter of negative GDP.  All it takes is another quarter of negative GDP, and we will officially be in a recession.

  

While all seemed to be gloom and doom, there has not be capitulation in the markets, neither has there been enough blood on the streets.  This is because there is no utmost negativity in the sentiments on Main Street as yet.  Many financial Youtubers are still telling followers and subscribers to “buy the dip”.  The persistently high CPI data from April at 8.3% did not help either, which effectively dragged the green futures of US market down to end deep in the red. 

What about me?  What have I been doing, and what do I plan to do next?

Should I sell?  Should I hold?  Or should I continue to buy?

If this happened before 2017, I will choose to sell a portion of my holdings to build up my cash position, hoping to buy in again at a lower price later.  However, after 2017, I have consolidated my past experiences, which tell me I will not be able to time the market.  Many times, I will make the sale at the lowest price.  Since I am so bad at selling, my plan forward is I shall just ride through the turbulent times.  To be frank, my emotional quotient for investing is still weak, and the recent crush on the price of Singapore REITs are not making me feel sunny (Mapletree REITs are dropping quite badly).  However, I need to learn from Dividend Tech Warrior, who just focuses on his annual dividend collections and ignore all price fluctuations.  Indeed, if I have no plans to sell (though I would like to buy but my limited cash is not allowing me to), I shouldn't be too bothered with the price.  As the saying goes, 'time in the market beats timing the market'.  I will just keep my shares, collect the dividends from my Dividend Portfolio at the meantime.  When the price is favourable, reinvest the dividends and grow the total number of shares I hold to increase the absolute amount of dividends I can collect with time.  I have learnt that if I aim to build up my passive income, buying and selling my shares in Dividend Portfolio is just 'one step forward, two steps back'.  I won't be able to build up a big enough share base for meaningful dividends if I keep having itchy fingers to buy and sell (let's not forget commission charges).

Till the end of April, I was still dollar cost averaging (DCA) into the market.  However, as my warchest is depleting and turnaround of the market is nowhere to be seen, I think I will slow down and pace out my DCA into the market for May, and possibly June.

Hereby, I would like to make a prediction for entertainment purpose.  I think the market may reach a bottom around the 3^rd quarter of 2022, and market sentiments may slowly improve in the last quarter of 2022.  Under what basis do I make such a prediction?  I am not making this prediction based on fundamental analysis or technical analysis, neither am I evaluating it based on macroeconomics.  I am making this prediction based on past experiences, where I will run out of cash to further buy the dip by the end of June, which will be a couple of months before the bottom (for the past 12 years, I always run out of cash a few months before the bottom).  I am no economist (my economics module in University was a total disaster), I have no financial background.  I am just a layman trying to invest in the market, regardless the market conditions.  As such, I foresee my prediction to go horribly wrong, especially when inflation is still persistently high and Russia-Ukraine war does not seem to end. 

Coincidentally, after I made my prediction when I was writing this blog post, I saw this article on MarketWatch, where Bank of America predicted, based on historical trends in the past 140 years, the current bear market will end on 19^th October 2022, with the S&P 500 dropping to 3,000 and NASDAQ declining to 10,000. This represents a further decline of 23.8% in S&P 500, and 12.0% in the NASDAQ from current levels.  However, if Bank of America's prediction is accurate, my layman prediction of the timing of the bottom is not too far off either.

Nonetheless, prediction is just a prediction. No one truly knows when the market will truly bottom, until in hindsight. The only thing I can do now, is what I did in March 2020. Stay the course, buy the dip at a comfortable pace, with the comfortable amount. If I can buy at the bottom, good for me. If I missed the bottom and is unable to buy at the bottom (because I am scared to buy further, or I have run out of cash to buy), it is also good news because the turn in the market will mean lesser loss (or more profit) for my portfolio. Just continue to hang on. Barista FIRE, here I come...!