The chart below shows the dramatic dropped in KLSE index since 2018 election, as compare to the roaring success of Dow & SP500 index hitting record high for the same period.
I had tabulated my trading profit/loss in KLSE market for the past 5 years in the table below. During the peak of my trading, it registered close to RM80,000 in net profit based all my closed positions in 2015. I suffered post-election loss of RM28,000 up-to-date. A wind of changed in fortune.
After election, my stock holdings in Malaysia took a big hit especially those counters that had a closed link to previous Government and its business prospects depending on Govt's contracts. Mega projects were put on-hold or cancelled. Drastic dropped in Govt spending to reduce debt and foreign investors pulling out billions of dollars from MY stock market in lack of good faith.
There are some meaningful lessons to take away from my "misadventure" listed below for you to ponders.
1. Beware of major world events that might have great impact on stocks like e.g elections, Brexit, trade war, Quantitative Easing (QE) or monetary policies.
2. Plan ahead in anticipating a change in the world events. Managing the risk/reward scale as the world event unfold. You can decide to increase, reduce or sit on the fence your portfolio.
3. Strategies adoption has to change with times especially when world's events unfolding. The trading strategies that you deployed today may bring great success in the past but won't guarantee future performance. Not even a great fund manager can guarantee that! That is why a disclaimer stated "Past performance is not indicative of future results" in any funds' statements or marketing brochures.
4. Cash holding is also a great strategy while you scope for new opportunities. Many thinks that cash holding is not an investment strategy as it doesn't generate profit, I bet to differ.
5. Admit one's mistake and cut loss when the tides turn is your life saving vest. My greatest mistake during 2018 Election was not holding enough cash and fully vested in KLSE stocks even though the market is changing direction. Too proud to admit my mistake and take the loss during early part of the year.
I always had better luck investing in other markets (SG & US) as compare to MY. To keep my investment portfolio diversified, Malaysia market is always capped at 10% as compare to US 50% and Singapore 40%. I plan to maintain this ratio in the near future until I can formalize a better strategy in this market.
This year, I changed my investment strategy for Malaysia market. As you noticed in table above, my investment decisions were dominated by small cap counters, mainly influences by rumors and tips provided by other online postings. I want to stay away from it for now and focus on stock counters that have distinctive qualities. Still work in progress, I will reveal more in my future posting when success start to roll in again. 😊
- WILLIAM CHENG
