Time in the market & Timing the market

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They sound like opposing terms but can we have the best of both worlds?

Answer is CAN... I am a believer of both concepts and Uncle8888's Pillow Stocks Strategy.
The whole process starts from (1) picking the right stocks (I am a lousy value investor, therefore I tend to pick 10-20 stocks from across the sectors instead of focusing on a few of supposedly good value ones), (2) protecting our capital by reaping the capital gains from the gems after some time even though we won't know for sure how long that will be, (3) staying vested at 'zero cost' to reap dividends (beauty of pillow stocks strategy).

How much we reap, in terms of dividends and capital gains, depends on our time vested in the market. On the contrary, we should be regularly weeding out the money-losing stocks (in my opinion, sell when the stop-loss price is hit even if the stock pays dividends) to invest in the money-making ones to ride the test of time.

When investing in the right stocks, we should also consider the margin of safety by investing at the right price and allocating the right position size. What are deemed as 'right' here may vary from one person to another. There is no perfect definition as each of us have different risk appetites.
The crux of the strategy lies in selling part of the pillow stocks for gains (recoup some capital and sleep better) before the market decides to ride the downward roller coaster. That's when timing the market plays a part. Time the ups and downs of market by spotting industrial trends, predicting the future prices via macroeconomic outlook, watching out for price actions...

Image result for pillow money stock image
Pillow stocks for pillows of money! (iStock image)

Sounds easy so far?

When it comes to execution it will not be easy at all - because we are 'kiasi' and afraid of being 'wrong'.

Buying the wrong stocks at the wrong time, selling gems out too early, missing to get the lows... Also pillow stocks these days are especially hard to collect as the market gets more volatile and have shorter bull-bear cycles. The 'right stocks' are harder to pick with the the ever-evolving technology and monetary policies. Stocks 10 years ago that rode the up escalator might not be the ones that can allow you to ride the up escalator again 10 years from now.

Nevertheless, we need to bear in mind that these two strategies are not mutually exclusive. If we are able to execute them appropriately and with discipline, we will be able to build a lucrative portfolio of stocks.

While the market continues its volatility after a long bull run since 2016, I have divested my biggest holding to sleep better at night. I must not rest on my laurels but continue to 修炼 my 3Ms - Mind, Money, Method.

Investing is about finding opportunities and opportunities knock only for the prepared. Looking forward to the Great Singapore (stocks) Sales. Here is a read from Investopedia on what indicators move the market.

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Related post: Opportunity costs in stocks market

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