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Saturday, June 10, 2006

TAIEX fell 288 points again

2006/6/8 TAIEX fell 288 points again. TAIEX index was now at 6331, trading volume was slighter larger than previous decline of 244 points. Market was primarily affected by the uncertainty for the political scandal of President Chen Shui-bian. Yesterday US stock market was affected by interest rate rising. All of a sudden people decided to sell their stocks at the same time. TAIEX was now lower than what it was at the beginning of 2006. You should consider yourself in good shape if your net asset value was higher than January 1 2006.

If you agreed with me that Taiwan’s economic growth is good this year. The GDP growth can no longer be compared with high growing area like mainland China. But Taiwan’s economic growth is stable this year. With TAIEX falling back to this year’s starting position, now is buying opportunity rather than selling. Be cautious not to gamble all of your money in one day. You can shorten your buying waiting interval for your regular investment plan.

Those who invest 1 unit of TTT (Taiwan Top 50 Tracker Fund) every month should consider buying two instead of one. Furthermore, you can transfer out some of your bond or deposit position to equity portfolio. For long term investors now is definitely not a good time to sell your holdings.

Now is also a challenging time for investor’s ability to control their cash flow, especially for those who use leverage to invest in stock market. As the price drop suddenly, most people have lots of unrealized lost on the book. You will have to realized lots of lost if you need to use cash for living now. The source of income to repay the monthly due becomes very important. It is fine for those have a day job or rent income investors, because they have plenty of income to pay the due. They don’t have to sell stocks for cash just because TAIEX falling 288.

I consider myself quite lucky this time. Since the core equity portfolio is for long term profit not for short term selling, it does not matter even if TAIEX falling more. Not like I could predict the falls, it was just lucky. In May I made a decision to sell a failed stock position for years. I had hold that stock for more than 2 years, including all dividends, I still lost a single digit percentage. The company’s revenue dropped again this year, and one of friend who left one of the company’s invested company. Their new product development project is not doing well. Thus I decided to sell that position in May before this falls happened. This left me 10% of cash position to use in the current opportunity.

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