Preservation of capital
Many investors and traders will agree that preservation of capital is the foundation of successful investing or trading. How do we implement it?
- Some will divest into bonds or preference shares
- Some think of defensive yield stocks or income stocks
- Some let the cash rotting in the bank
My strategy in preservation of capital is to take back my all investing capital and never mind if it is rotting in the bank while waiting for Mr. Bear to come. But, I will still let my profit runs in the market just in case Mr. Bear never come.
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Mr Bear is not "never come". It will definitely come, one fine day. So whatever you have in the market, i don't think you like to let it run and run until out of steam - when unforeseen circumstances happen. If you let it be, than most probably you have to wait for the next cycle. i know i have been there. i try very hard not to go there again.
ReplyDeleteThere is a wise saying, "Always leave behind about 10% of the money on the table." So come out earlier is always better than to be too late. You will then have "extra capital" to invest for the next cycle. But it is very hard to achieve.
My 2 cents worth of experience.
Currently only invested 15% in equity with the rest 'rotting' in the bank. Has been waiting for the Mr. Bear for a year, still no sign of it. Nevertheless, when Mr. Bear comes, I will show hand.
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