By: Derek Lim

This will be my last post before I go on a short holiday to Taiwan. I’m expecting a pretty hectic end to the year in work, investing and blogging.

The Beast
It has been a pretty tiring month or so wrestling with this beast. My portfolio has dropped by 32% (including dividends) and I’m worried about getting lost in the madness that is engulfing our financial markets. I’m extremely fearful that I will succumb to the beast (Greed) and start buying on impulse thinking that bargains are everywhere, without taking into consideration my own risk tolerance, current situation and future plans, and eventually losing my sanity. The frightening part is that this beast grows ever stronger as the market declines.

Do I slay the beast within me, tame it or work with it? To slay it is to stop investing altogether, taming it is to invest in low risk instruments like bonds and FDs (not minibonds) and to work with it is to stay vested and look out for potential bargains. Of the three, I’m more inclined to choose the last and this also requires the most effort.

Before I start to invest
In such a volatile market now, it is especially important to do a proper asset allocation and not use all my cash on bargain hunting because there is a high possibility that I will lose the entire sum of money or suffer a heavy loss if I were to sell it prematurely.

My conditions before I can start bargain hunting are:

1. Emergency Cash Fund.
2. Insurance coverage for my parents, girlfriend and self
3. Near term spending – 2yrs
4. Retirement Fund for my parents

After setting aside all of the above, I realized that I don’t have much money left. It doesn’t help that my supervisor painted a bleak picture of no bonus and wage freeze due to the gloomy economic outlook. My challenge is how to make the most out of my limited amount of funds left to invest in the market.

Where will Mr. Market go?

Even the experts have problems forecasting the future market so instead of joining them, I have decided to think of the possible outcomes that will happen in the next 3yrs (though most experts believe that we will recover in yr 2010) and plan my move from there.

A. The market trade sideways and goes through a period of stagnant growth.

B. No sign of recovery and continue its decline amid at a slower rate.

C. The market begins to recover.

D. A technical rebound before free falling again.

I have not done any detailed planning yet but a few quick thoughts; – I believe scenario B should be ending soon and I will give it 12 months for it to bottom out. After which A seems to be the most likely scenario after that. Scenario C is the most optimistic outlook but also one with the most risk because it is difficult to judge if the recovery is real. It might turn our to be Scenario D. Scenario C also presents the least buying opportunity and I will most probably not enter the market at all.

My Website

It’s been a little more than a year since I started this website. Traffic has been pretty decent about 200 readers a day and my authors have been supportive in allowing their work to be published. I also got to know several people with similar ideas. I believe in synergy and collaboration and I enjoyed working with them. However, my site has been pretty stagnant. I hated myself for being too lazy – I have wanted to change the layout for so very long and I have some features that I wanted to incorporate into it but each time I get back from work, I just want to sleep. Even my weekends are spent recuperating for the week ahead. I must rekindle my flame. I want to turn this site to a prominent and reputable site for bloggers in finance and personal investing and I shall do it even if it means sacrificing my sleep.

In this time of uncertainty,  I’ll like to wish everyone strength and courage. When there are problems, there will be a solution, where crisis lurks lies opportunity and for every fall that you pick yourself up from, you will only grow stronger.