Sunday, March 22, 2020

Covid-19 market selloff: It's ok to "panic". It's key to survival

Many retail investors have been caught up in the panic selling caused by the Covid-19 virus scare. REITs and local banks are popular among retirees and FF(financial freedom) seekers for their dividends. Several REITs fell 50% within the last 20 days. Naturally, many retail investors will panic sell at recent lows. Last Friday (20Mar2021), some REITs made monstrous gains as much as 20% intraday. Those who panic-sold at recent lows may be having a miserable weekend regretting their bad sell.

During panicky time like now, here are some standard investment advice you hear;
- Our worst enemies are ourselves because of our emotions
- Fear and greed drives humans to buy at the highs and and sell at the lows.
- Panic is bad.
- Be cool as a cucumber. Don't lose your head while others lose theirs.

I can't argue against these standard investment advice. They are standard because they are mostly right but in investment, there is no absolute right. It's not a STEM topic. Based on personal experience, it's ok to "panic". It's why I'm still surviving in the financial markets. The key is to panic early with a sense of proportion. Easy to say, not so easy to execute, though.

My personal favourite proprietary market timing indicator on when to get out as the market gets jittery is the lao-sai(diarrhea) indicator. When I start to shit too many times a day because of a bloody market, I sell and cut my risk exposure to the point when I can resume my normal shitting of once per day. George Soros has similar timing indicator. He gets backache while I shit more often. My shitting has served me well and is key to my survival in the financial markets. If your portfolio is affecting your body and mind, then sell to the point until the risk exposure no longer affects your body and mind.

Some people would say this is proprietary and cannot be copied. I would argue that fear is a basic instinct of human beings. Nature has blessed all of us with this basic fear instinct which is key to survival of the human race. You don't have to copy. It's in all of us. Don't try to suppress your fear by pretending to be a cool cucumber. Use the Force!

Having said that, do try to sell with a sense of proportion. Don't sell until the baby is thrown out with the bathwater. I can't go into specifics here. I don't like to write articles as if I sound like a guru. Frankly speaking, I don't know what the market is going to do tomorrow or which stocks are going to make money with a high level of certainty. When I get fearful, I don't read other people's articles/opinion pieces for assurance. Often, these financial articles are biased. If the writer has a huge position on, he will be bullish and talk up his stocks. If the writer just sold off his position, he will be bearish and talk down stocks. The bias can be subconscious with no ill intention if the writer is not paid. Now, if the writer is paid, I won't say he has ill intention but he has got to do whatever he is paid to do. The paid financial analyst/salesman can wax lyrical on whatever stance he is paid to promote.  In investment, you can always find data to support whatever stance you want to make. If you don't know about the topic, you are a sheep waiting to be fleeced.

So, don't rely on others, especially when it comes to money matters, because there's a lot of hidden agenda. Better rely on yourself. Nobody knows your own unique situation better than yourself.

If I were still an amateur with no systematic process to deal with an unprecedented market sell-off, then what I will do is to get in tune with my own body signals. For example, my lao-sai indicator. Be myself and listen to myself, not others. Use the Force, Luke. It's in all of us.

If you happen to be one of those who panic-sold and the stock you sold one day ago shockingly rise 20% the next day, don't feel bad. I think you did the right thing to survive. If you stay put or even double-down and the stock subsequently crashes another 50%, rest in peace. Nobody knows for sure how the stock will turn out but I would rather be the person who fights and runs away, so that he shall live to fight another day.

In financial markets as in everything else in life, you don't have to win all the time but you damn well have to survive all the time.

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