With the equity bull trend seeming to run out of steam, I can understand why some investors are seeking to throw in the towel and head for the exit. Trading in a choppy market can indeed be a very frustrating process.
With no immediate trigger of a recovery, it’s not a bad idea to take a break and wait until a clear uptrend emerges.
But speaking for myself, I must say I’ve chosen to keep most of my core positions.
There are several reasons for this.
First, the intraday volatility of US market has shown sign of narrowing since April 13. That’s a good sign.
Second, if one walks away now, it’s hard to get back into the market at a comfortable level. If there is only a moderate pullback, and a quick recovery follows, it’s almost certain that I won’t be able to make up my mind and re-enter.
Keeping certain core holdings is therefore a more balanced approach. Perfect timing, after all, is very hard to catch.
Third, trading in a difficult market can be seen as some kind of training to sharpen one’s skill and market sense.
In the meantime, I am now more inclined to bet on individual sectors rather than the broad market, a strategy which I believe is better in the current situation.
For instance, global funds appear to be leaving tech plays for consumer stocks. I have adjusted my portfolio in a similar way, by adding European luxury brands and Japanese mass-market names.
The adjustments, as of now, have yielded positive results.
This article appeared in the Hong Kong Economic Journal on April 17
Translation by Julie Zhu
[Chinese version 中文版]
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