Thursday, December 30, 2010

Reflections on my first six months in the stock market (Part 2)

I must admit that these six months have been very bumpy, the market has been very volatile. When I started investing, the Fed was having a deflation and poor / low economic growth dilemma...

But alas, the Fed resorted to the all-famous "quantitative easing" aka the "printing of money" to devalue the US dollar, which resulted in increased liquidity and people started putting their money into the stock market and boom... the stock market made a strong rally...

Returning back to the local situation, Singapore enjoyed a strong double-digit growth for the year of 2010. As a result of the strong economic performance locally, local companies mostly reported good earnings (except for a few companies like Wilmar) and correspondingly, the stock market also rose strongly...

Then there are also other big events that happened that in some way or another affected the stock market - like the mini Korean War, the Europe Debt Crisis (PIGS: Portugal, Ireland, Greece and Spain), US Mid Term Elections...

I find that one should not over-react (read: panic) when such events occur. Such events would likely only have a temporary effect on the stock market. Eg. The North Korean missile bombing would likely not affect the fundamentals of the companies I have shares in...

One should always carefully evaluate the impact of such events, and decide if the news would have a short-term or long-term impact (beyond the obvious poor market sentiment likely to be experienced). And I have learnt my lesson well and have over these months learnt to keep my emotions at bay when investing.

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