Help help! My portfolio is RED!

Every investor's nightmare....To see the paper value of your investments in the RED when you do a mark-to-market exercise based on closing prices of shares you own on the SGX.

These past few weeks continued sell-down of virtually most of the shares in the Singapore Exchange means that for many of you (including myself), our portfolios are under water or showing unrealised losses. What can we do during times like this.

I don't know what others can do, but I know what I have done... Become defensive.

Defensive strategies in a weak stock market
I have also suffered during this recent market meltdown and perhaps the start of a bear market. My mark-to-market paper losses have resulted in my portfolio performing at a -12%. I have also incurred realised losses when I cut some of my losses to conserve cash and preserve capital. I am now at 33% cash and cash equivalents (savings, treasury bills, fixed deposits) and 67% in equities (as compared to almost 90% in equities and 10% in cash and cash equivalents 2 months ago.)

This is my strategy, to maintain this asset allocation ratio while I build up my cash reserves again. I still believe I should be invested in the market because some of my holdings like a couple of bank stocks will still generate dividends and do well in their underlying business. However, their market valuations have taken an undue beating due to US sub-prime as well as US recession fears.

I believe the market will recover. The question is WHEN??!! In order for you and I to survive this tumultous market developments, we must have holding power. My 33% cash and cash equivalents allows me to handle day-to-day living expenses plus some buffer. This has already factored in my outlay in getting a car as well as my upcoming family expenses for my baby daughter who will arrive sometime in March 2008.

Live well within your means
This market shock that has burnt many retail investors of stocks and shares teaches us the lesson about diversification, i.e. cannot put 100% of your investible savings PURELY in stocks and shares. It also teaches us to continue to live within our means because market conditions can change very fast. I remember the euphoria back after the August 2007 correction in SGX that STI will hit 4000 by December 2007. Now we are seeing STI closer to 3000 just 2 weeks into 2008!

If you can work within your paycheck and other passive income and continue to plough back some savings into prudent investments, you have the odds stacked in your favour to build your retirement nest egg, bit by bit, dollar by dollar, cent by cent.

The stock market moves in cycles. Bull and bear markets. If you have holding power, time is ON YOUR SIDE!

Be well and prosper.