I started serious Investing Journey in Jan 2000 to create wealth through long-term investing and short-term trading; but as from April 2013 my Journey in Investing has changed to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

Since 2017 after retiring from full-time job as employee; I am moving towards Investing Nirvana - Freehold Investment Income for Life investing strategy where 100% of investment income from portfolio investment is cashed out to support household expenses i.e. not a single cent of re-investing!

It is 57% (2017 to Aug 2022) to the Land of Investing Nirvana - Freehold Income for Life!


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Welcome to Ministry of Wealth!

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

"For the things we have to learn before we can do them, we learn by doing them." - Aristotle

It is here where I share with you how I did it! FREE Education in stock market wisdom.

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Value Investing
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Saturday, 13 August 2011

Cut losses - The Truth, The Pain, and The Chance! (2)

Read? Cut losses - The Truth, The Pain, and The Chance!

For the past two weeks, have you been cutting your losses in the stock market or you are preparing to cut losses soon and then stay sideline to wait for clearer confirmation of rebounding to re-enter. I am not sure how many of us are that technically savvy and seasoned enough now to spot that clear market reversal signal.

What looks like a Rebound may actually be a Dead Cat Bounce too.

In a full blown Bearish market, there will be several instances of Dead Cat bounces.

Cutting losses

Classic textbooks advice that you should cut your losses fast and live to fight another day. Paper losses are real and they may cause you opportunity cost in the stock market.

But, how sound are these classic advices?

Actually, it will depend who are you in the stock market and your stocks pick strategy. By locking in those negative returns through cutting losses and thinking that you can get back in time for stock recovery. But, when you have missed it and coming back to the stock market too late. It may create bad outcomes in your investment portfolio recovery.

Who are you in the stock market and your stocks pick?
  1. Do you have a long-term investing goals?
  2. You DO NOT need to withdraw significant amount from your current investment portfolio in the next 2-3 years to meet some big expenses?
  3. Does your stocks still expected to pay you decent dividend yield of at least 3-4% in coming 2-3 years?
  4. Does your stocks have past history of staging strong stock price recovery in the bull market?
If your answers to 1-4 are all YES, you may want to think again of cutting losses. It may be better for you to leave your stocks alone to recover from paper losses while taking your next stock dividends payment as pain killer.


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