When it dropped around 3.28 at the end of May, I had been following the counter for a while and thought to myself that 3.28 per share seems to me like a good price to buy from Mr. Market. Firstly, SingTel had announced that it would maintain its 5% dividend yield for the next 2 years and at $3.28 it represented a better value than buying at a previous $3.40.
And so, I bought 1000 shares at $3.29 after doing my due diligence, confident that it would be a good investment.
What happened in the next month blew me away. For the whole of June, SingTel seemingly plunged to no end and hit an all time low at $3.02!
At that point in time, I hardly know much about TA. And so, some of my friends started telling me: "Aiya, bro. You caught the falling knife. SingTel free fall leh why you buy sia."
And it did make me rethink about this counter and also supposedly some damage mitigation plans, like averaging down, or buying more. Did I make a mistake?
Lessons Learnt:
1. Everyone's investment strategy is different. What is mine?
When my friend mentioned that I caught the falling knife, he is much more of a trader who does most of his trading in the US. It made me re-think why I bought SingTel in the first place. First of all, I invest for income/dividends and what is my investment strategy? Pricing and entry positions are always relative and there is always a better thing to have been done in hindsight. It is therefore important to stick to our own strategy, and not be swayed too much by the noise. As long as we have done our due diligence, true that we could have earned more or lost lesser but it all depends on Mr. Market. It is incredibly important to know what we are doing and why.
2. There is always imperfect knowledge
There is always the uncertainty factor. And most of the time buying a stock is akin to making an educated guess. What are the factors that cause the share price to drop? Is it a question of fundamentals or market fear and sentiment? If we cannot tell the difference then we deserve to be making the loss. Having said that, it is all about probability. We can do all the homework and Mr. Market may act differently.
3. Portfolio Sizing and the ability to hold on to the investment is important.
If our exposure to a single share is huge, we can be sure that if that share takes a plunge, we will be hit quite badly. This is why it is important to consider the amount of exposure we uptake in a single stock. The money we invest should also be money that we do not need urgently and can be used to tank the ups and downs while Mr. Market does his thing. Having more cash on hand and also investing money that we don't need urgently will give us more freedom and choices without having to worry about whether we should be doing emergency cutting losses etc.
So, will SingTel continue to rise? Who knows? Perhaps it might take a plunge again on Monday till even lower than $3.02. I have done my homework and I'm not worried. 😊
Until Next Time,
K.C.
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Related topics:
1. About K.C. What is my story?
2. My 3Cs to money/investing
3. Why you need to set aside money for savings first
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