The stock markets have been tanking recently because of the worsening virus situation. Every time I see such big drops, I start to slowly turn on the cash taps to buy the market dips. This means I start averaging down on my local and global ETFs using manual investing and funds transfers into my robo-advisor accounts.
At first, I invest amounts up to a few hundreds at a time in stage 1 when the market starts selling off. As the market sell-off worsens, I invest amounts up to a few thousands at a time in stage 2. When I feel like the market is at its worst sentiment, I invest amounts up to a few tens of thousands at a time in stage 3.
Admittedly, I have yet to get to stage 3 in the last decade since the 2007/2008 Global Financial Crisis. Technically, it would have to be a significant market crash for this to happen and I don’t feel like one has occurred yet. Even if there had been significant market dips during this time.
In the past week, I have invested about S$10,000 through a combination of manually buying individual stocks and ETFs. As well as funds transfers into my robo-advisor accounts. Which means I feel like we are only at stage 1. Even if the stock markets are falling every day. Since they had gone up a lot in recent years.
It’s a slow but safe way to build up my equity positions. I get exposure to any upside that comes from a sustained rebound in the stock markets if the situation improves. But I limit my downside if the situation worsens instead. Which is what ETFs are all about if you think about it.
I can’t chase the higher returns that individual stocks can provide whether by investing or trading. Or the even higher returns that riskier financial instruments such as cryptocurrencies can give. I’m just going to end up being frustrated at my lower returns and start messing up my ETF investing strategy.
I reckon it’s important to have decent income for my ETF investing strategy to work. And it’s essential to have a large cash position to maintain my objectivity. Which is why my focus is on maintaining and increasing my salary income rather than on ETF investing. Because that’s how I benefit from the time saving on not having to research and monitor individual stocks.
If I am going to spend the time saving on doing nothing and relaxing, then it’s going to limit the benefit I can extract from ETF investing. Because it’s not enough just to DCA the same amount every month. I have to invest more every month over time as my salary income goes up from channelling the effort saved on less investment monitoring into income producing activities i.e. improving my income source.
In times like these, I have to be patient in everything I do. No point rushing and just let time pass for more clarity to surface. More importantly, I have to make sure I’m gradually putting more money into the stock markets. Whether it’s a bit at a time or a lot at one time. It just cannot be the same amount as what I usually put in every month.
It has to be more because it’s more important for me to catch the recovery than an individual stock investor. Simply because my return on investment will never be as high on an ETF compared to a well-picked individual stock.
To be honest, what’s the most concerning thing to me now isn’t the falling stock markets. It’s the Singapore companies and government cutting pay, bonuses and freezing promotions. Since I work in a local bank, I’m hoping senior management doesn’t take this opportunity to follow suit.
It would be an unfortunate remuneration outcome because this cycle is for our performance in 2019 and 2020. It just so happens that the decision-making process of the remuneration outcome for the previous year comes at a bad time in the new year. Just when the economy is going downhill.
I do have quite a bit riding on this cycle because I moved internally 2nd half of last year within the group to my new job role without a pay raise. So my bonus is already going to be pro-rata and I need the upward pay adjustment to make up for it. If I don’t get it, this is going to screw with my plans to push my base pay up in the next few years.
I know I’m being selfish because there are much bigger global health problems causing a crisis. So I keep reminding myself to accept whatever happens because it’s for the greater good. I just hope this virus situation can be resolved sooner rather than later. But it’s not looking that way so I can only hope for the best.