I was browsing the Bloomberg website when I chanced upon an article titled, "Too Much Information From Markets Is Jamming Up Real-Time Trading Models" [link].
It was interesting to note no one truly has a handle on where the economy is heading. Not even the pros who manage money for a living. To divine the next big downturn from the market is turning out to be a futile affair.
I had often heard of the adage that the stock market moves ahead of the economy by six months to a year. But according to Goldman Sachs researchers, this is simply not true. (For recessions, at least.)
While there is no clear trend, there is no lack of market action either. On the local bourse, I found unexplainable movement in certain stocks. Like CapitaLand Investments (CLI). The stock had moved from a low of $3.69 to a high of $4.11 over the past month alone. And last Thursday, SembCorp Industries (SCI) saw its stock price jumped 7 percent in a day. It was so dramatic that it sparked an inquiry from the regulator, which SCI management claimed being unaware of the reason [announcement].
Big institutional funds taking on a position? Front runners with inside information grabbing a lead? Your guess is as good as mine.
Despite the gyrations, retail investors like you and me shouldn't need to worry. You probably already have a sensible investment strategy thought out. (Value oriented? Sector rotation? TA?) What is left to do is to be DISCIPLINED enough to follow through the plan all the way, regardless of how the market swings.
A sensible investment strategy is one that has a logical basis to win more often than lose. Alas, the map is not the territory. Often, we ourselves are the reason for the lack of consistent success.
Loss aversion, confirmation bias, endowment effect and sellers' remorse are well-known ailments that afflict even the most seasoned investors. We just need to make sure our emotions are left by the door and cool heads prevail when it is time to buy or sell.
After all, the stock market is merely a numbers game. Each time, we are trying to be wiser than the counterparty. And we will not be right all of the time. But as long as one wrong move does not wipe out our capital, we should be in good shape. Utter defeat only comes when your expectations are beyond what is realistically possible.
It was interesting to note no one truly has a handle on where the economy is heading. Not even the pros who manage money for a living. To divine the next big downturn from the market is turning out to be a futile affair.
I had often heard of the adage that the stock market moves ahead of the economy by six months to a year. But according to Goldman Sachs researchers, this is simply not true. (For recessions, at least.)
While there is no clear trend, there is no lack of market action either. On the local bourse, I found unexplainable movement in certain stocks. Like CapitaLand Investments (CLI). The stock had moved from a low of $3.69 to a high of $4.11 over the past month alone. And last Thursday, SembCorp Industries (SCI) saw its stock price jumped 7 percent in a day. It was so dramatic that it sparked an inquiry from the regulator, which SCI management claimed being unaware of the reason [announcement].
Big institutional funds taking on a position? Front runners with inside information grabbing a lead? Your guess is as good as mine.
Despite the gyrations, retail investors like you and me shouldn't need to worry. You probably already have a sensible investment strategy thought out. (Value oriented? Sector rotation? TA?) What is left to do is to be DISCIPLINED enough to follow through the plan all the way, regardless of how the market swings.
A sensible investment strategy is one that has a logical basis to win more often than lose. Alas, the map is not the territory. Often, we ourselves are the reason for the lack of consistent success.
Loss aversion, confirmation bias, endowment effect and sellers' remorse are well-known ailments that afflict even the most seasoned investors. We just need to make sure our emotions are left by the door and cool heads prevail when it is time to buy or sell.
After all, the stock market is merely a numbers game. Each time, we are trying to be wiser than the counterparty. And we will not be right all of the time. But as long as one wrong move does not wipe out our capital, we should be in good shape. Utter defeat only comes when your expectations are beyond what is realistically possible.
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