I began trading stocks in April 2007 after attending a basic stock market seminar from Philstocks (an online stock broker). I then joined stock trading forums such as Finance Manila and Trader's Pizza. In just a few months, with the help of tips, rumors, and a little bit of luck, my portfolio immediately grew by 30%. I felt good. I felt that earning from the stock market was easy. I felt I was good. It even came to a point when I was already contemplating on setting up a fund where my sister and her officemates can invest their money (in return, I'll have a cut on the profit).
Then came the subprime mortgage crisis in the second half of 2007, which lead to the US recession, and eventually, the global financial crisis of 2008. Add to that the Manila Peninsula siege in November 2007 that caused a massive selldown in the PSE. I suddenly found myself staring at a 50% drop in my portfolio. I was humbled by Mr. Market, slapping my face with a six-digit loss. I didn't know how to react,ang bilis ng mga pangyayari. Parang isang bangungot. Nakakapanghinayang. Should I sell and swallow the losses or should I just hold? I didn't know what to do.
In 2010, I was finally able to recoup my losses and started earning again. It took me quite some time to recover, but I'm glad that I'm still in the market up to now. I had better luck compared to others who simply quitted and vanished from the stock trading forums.
I would like to share the 5 things that helped my stock trading portfolio recover from the global financial crisis. May it be a lesson to newbie traders, help them prepare mentally and emotionally, for the next bear market cycle.
1. Think Long Term
I told myself that I'm in for the long haul, that I'll be trading stocks for more than 10 years. What happened was just a temporary setback to my trading career.
Right now, including the time I stayed away from the market, I'm already on my 8th year in stock trading. I'm glad I stayed. I think I'll still be trading even after I retire to keep me busy.
2. Learn to cut losses
The problem I have with my stock portfolio before was that it contained several penny stocks and second liners. A rookie mistake that I also did was that I entered the trades without a plan. I didn't consider if I'll go short term or long term, and I didn't have a cut loss plan. That's the reason why my losses kept on piling.
Eventually, I sold the penny stocks and most second liners, eventhough it hurts. At that point, I needed to preserve my capital. I then used the money to blue chip stocks such as TEL and AC.
3. Continue studying
I attended the free Fundamental Analysis (FA) and Technical Analysis (TA) seminars provided by COL Financial (formerly CitisecOnline). Believe me, the Tektite Auditorium was jampacked with traders and investors! I guess, just like me, they got trapped due to the financial crisis.
Edward Lee, the Chairman and CEO of COL Financial, knew why we were there. Aside from the FA and TA lessons provided by April Tan and Juanis Barredo, respectively, he gave us valuable tips on how to approach the current market situation (he's already a veteran at that). One thing that stuck to me was that, in a recovering market, the first to bounce back will be the blue chips. So that's what I did, bought TEL and AC and held on to them for more than a year.
Aside from the seminars I attended, I also read books on TA and discovered the usage of other technical indicators. I was able to apply the acquired knowledge eventually.
4. Learn from the experience of others
Whenever I read the forums, aside from checking the discussions on different stocks, I also read the sharing sessions of traders who have experienced the similar thing in the past. In Trader's Pizza, there was a trader who also lost 50% during the Asian Financial Crisis, and eventually recovered the losses after 10 years. Another trader lost 80% of his capital, but was also able to recover after several years (that guy is a stock "guru" now).
Hearing their stories gave me hope that it's possible to recover the losses in time. Just like saying that there's a rainbow always after the rain.
5. Take a break from the market
Watching the Dow Jones drop 400 to 600 points daily was very stressful. Since the PSE was coupled with the US market, it's sure that the PSEi will be hit pretty hard too. Seeing your paper losses go higher each day was stressful indeed! There were times I just wouldn't login to my trading account so I won't see the paper losses.
After I bought TEL, AC and other blue chips, I laid low from stock trading and just let the blue chips do their thing. When I checked my account after a few months, I already saw encouraging developments. And by 2010, I was able to recover all the losses, plus some gains.
Financial Literacy
,
Home
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment