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Buying into market crash, does it work (nope)?
By Wilfred Ling, The IFA on Duty  •  August 15, 2011

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Just prior to the market crash at the end of July 2011, my client asked me whether should he start buying into branded and big name companies once the market crashes. I told him be careful of that as one wouldn’t want to catch a falling knife. Indeed, during the financial crisis many people who invested right at the bottom of the crisis found to their horror that they not only they did not make money but lost significant amount of money.

Just for curiosity, I created a paper portfolio of US$100,000 to invest equally in 5 big branded companies namely Goldman Sachs, AIG, Citigroup, JP Morgan and Bank of America. The inception of the portfolio was on 30 Dec 2008. As at 12 August 2011 closing prices, the portfolio is worth only US$88,140.16 after taking into account of dividends. Dividends are however not reinvested as this is the ...

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By Wilfred Ling, The IFA on Duty
Wilfred Ling is a Chartered Financial Consultant with Promiseland Independent Pte Ltd. He is a fee-based financial planner by profession.
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2 responses to “Buying into market crash, does it work (nope)?”

  1. Temperament says:

    In all markets, it depends on the stock you buy at what entry price. Is the entry price right? And of course nobody is 100% correct for the stock and entry price. Both are equally very important.

  2. Derek Lim says:

    Hi Wilfred,

    Thanks for the research. I’m actually quite surprised that those company you mention fail to recover. I now have second thoughts when buying blue chips during a recession.

    What Temperament mention is also quite true. I remember Citi dropped to a few dollars and one of our local tycoon made a huge pile on Citi. Just some thoughts – Besides the entry point, is passive investing i.e. buy and hold still workable? If the investor do DCA or VCA, would he have make a profit?

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