| 12 comments ]

Currently, I am almost 100% invested in Singapore stock market. There is always a thought in my mind to reduce my invested capital when STI marches closer to the previous peak. Now that STI is above 3k, I believe it is a good time to put my thought into words - is time to have a PLAN.

This is a SIMPLE plan which assumes that STI will eventually move toward the previous peak at 3906. I use the Fibonacci Retracement tool to determine the points to limit my invested capital. This is illustrate by the chart shown below:



Example:
(a) If STI hits about 3256, my invested capital will be capped to 78.6%.
(b) If STI hits about 3906, my invested capital will be capped to 23.6%.


Rules
  • The plan will start once STI hits the first target at 3256.
  • The plan will stop once STI hits the last target at 3906 OR falls below 3000.
  • After the invested capital is reduced to a certain percentage, it cannot be increased again. For example (a),  my invested capital will be capped at 78.6%, and cannot be increased even if STI drop back to 3000.
More rules may be added..

    12 comments

    Createwealth8888 said... @ October 2, 2010 at 10:45 AM

    It is sad when the Bear come and no money to buy from them cheaper.

    Alvis said... @ October 2, 2010 at 11:21 AM

    Totally agreed with you, and that's why i have this simple plan to cap my invested capital when STI goes higher and higher. When i said it is capped at 78.6%, it does not mean that i need to fully invested at 78.6%. :)

    ezinvest said... @ October 3, 2010 at 3:37 PM

    is it necessary? what if sti broke its historical high and continue to go north? there may be a point which you feel gian and enter then tio stuck.

    why not do it this way? as long as your position continue to earn money, you can continue to put more position. once you have a losing position, make sure you exit before you can put another? just an idea.

    Alvis said... @ October 3, 2010 at 8:52 PM

    ezinvest, thanks for your suggestion. As you can see, if sti hit 3906, i am still 23.6% invested - not completely out of market.
    When sti hit 3906, i will come out with another plan - most likely to be short term trading plan.
    Currently, we are already 3 years since the peak at Oct 2007, and 2 years since the bottom.
    I believe one of the key to successful investment is capital management. :)

    Createwealth8888 said... @ October 4, 2010 at 8:09 PM

    Don't let this happen to us.

    Take care!

    http://3.bp.blogspot.com/_NQ3W8fjmhE0/TKbHyIzenSI/AAAAAAAAEEI/kdm2tTYSowo/s1600/bear+stole+lunch.jpg

    Denzuke Finance Ninja said... @ October 6, 2010 at 9:41 AM

    Your strategy is prudent to set that target and exit strategy. I have now factoring this system and instead of a percentage, will dispose of all except those earning constant dividends (e.g. Singtel, Starhub) and gaming stocks (e.g. BJToto, Genting Singapore).

    Alvis said... @ October 7, 2010 at 7:33 AM

    Hi Ninja, thanks for the comments. Yes, is always good to have a plan.

    Createwealth8888 said... @ October 7, 2010 at 8:12 PM

    I am trying to understand your money mgmt strategy.

    Example:
    (a) If STI hits about 3256, my invested capital will be capped to 78.6%.
    (b) If STI hits about 3906, my invested capital will be capped to 23.6%.

    STI 3XXX --> 3256 --> 78.6% --> 3907 --> 23.6%

    No plan for

    STI 3XXX ---> 29XX --> X% etc

    Alvis said... @ October 7, 2010 at 8:38 PM

    if STI 3XXX, then STI goes below 3000, as mentioned in one of the rules -> the plan will stop once STI falls below 3000. This means that this plan become invalid, will need to come out with another plan lor.. :)

    Createwealth8888 said... @ October 7, 2010 at 9:14 PM

    STI 3166, assume you are now at 98% and if 3166 --> 29xx, u still remain at 98%?

    Alvis said... @ October 7, 2010 at 10:21 PM

    As i have mentioned, the plan only start when STI hits the first target at about 3256.

    Once it hits about 3256, i will cap my investment capital at 78.6%, but it doesnt mean i must be fully invested at 78.6%, can be lower. Then, if it drop toward 3000, still cap at 78.6%. If it drop below 3000, then this plan is no longer valid, and will come out with another plan..

    Denzuke Finance Ninja said... @ October 9, 2010 at 3:09 PM

    If the STI sustains a progressive increase and has exceeded your 3906 level and then soldiers on to 4500, to even 5000 points. In what stage would you attempt to re-enter to reinvest? Or your status quo remains indefinitely? Passing those levels, the investment psychology would have greatly changed.

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