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Preparing for the market downturn
28 Sep 2021 (586 views)  

Dear Mr. Tan
I congratulate you on your successful trades. You make it seem so easy to make money. But what happens if there is a sharp drop in the stock market? Will you still make money?

REPLY
If there is a sharp drop in the stock market, I hold on to my stocks and collect the dividends.

In most cases, the dividend that I get on the stocks is higher than 3% per annum. This is better than keeping the money in the bank to earn 0.5% or less a year. 

Some of my stocks do not pay any dividend. I will still keep them and wait for the stocks to recover. 

Most of my stocks are of large companies. The chance of the stocks getting bankrupt is low. 

As I invest in the stocks using cash, and not on borrowed money, I can afford to keep them for many years until the stock market recovers. 

Even if I have to take a loss on some of the stocks, i.e. I sell them before the price recovers, I can offset the losses against the gains that I had realized earlier. 

I usually sell the stocks which appreciated by more than 30% and the fundamentals (i.e. PE ratio and dividend yield) is no longer attractive. 

I am well prepared for a market downturn. I keep some cash to buy the cheap stocks when the downturn occurs. 

Tan Kin Lian
 


Preparing for the market downturn
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Dear Mr. Tan
I congratulate you on your successful trades. You make it seem so easy to make money. But what happens if there is a sharp drop in the stock market? Will you still make money?

REPLY
If there is a sharp drop in the stock market, I hold on to my stocks and collect the dividends.

In most cases, the dividend that I get on the stocks is higher than 3% per annum. This is better than keeping the money in the bank to earn 0.5% or less a year. 

Some of my stocks do not pay any dividend. I will still keep them and wait for the stocks to recover. 

Most of my stocks are of large companies. The chance of the stocks getting bankrupt is low. 

As I invest in the stocks using cash, and not on borrowed money, I can afford to keep them for many years until the stock market recovers. 

Even if I have to take a loss on some of the stocks, i.e. I sell them before the price recovers, I can offset the losses against the gains that I had realized earlier. 

I usually sell the stocks which appreciated by more than 30% and the fundamentals (i.e. PE ratio and dividend yield) is no longer attractive. 

I am well prepared for a market downturn. I keep some cash to buy the cheap stocks when the downturn occurs. 

Tan Kin Lian