As from April 2013 my Journey in Investing is to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

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This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

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Sunday, 3 January 2010

2008 The Greater Bear: Defensive Stocks?

Market Myth: When Market Crashes, it is wise to buy into defensive stocks that provide yield.

Five worst performing STI component stocks in 2009:

1. StarHub, +10.8%
2. ComfortDelgro, +13.1%
3. SMRT, +15.8%
4. SPH, + 20.9%
5. SingTel, +22%

Five best performing STI component stocks in 2009:

1) Noble Group, +218.6%
2) Genting Singapore, +201.9%
3) Jardine C&C, +184.2%
4) Golden Agri, + 145.7%
5) Olam Intl, +131.3%

What is defensive stock?

Defending what? Protecting capital or just defending the paper losses during market crashes?

I think defensive stocks are more towards easing of investor's pyschological fear of losses and emotional pain even it is only paper losses.

"However beautiful the strategy, you should occasionally look at the results." - Winston Churchill


"It's only when the tide goes out that you learn who's been swimming naked." - Warren Buffet
 
"When the tide comes back, you will soon find out not all boats rise high." - CreateWealth8888
 
Look at the five worst performing STI component stocks in 2009, all of them are defensive stocks. Why?

Do defensive stocks really help to defend your capital if they fail to rise high when the tide comes back?

Think about it?


Personally, I am not into defensive stocks so I don't hold any of top five worst performing STI component stocks; but I have been playing Noble and Olam for a while in 2009.

Instead of buying into so-called defensive stocks out of fear to hedge against falling portfolio value; maybe it might be better to practice portfolio management to mitigate risks

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