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One strategy which I have formalised in the past year is to have 30%-70% cash-stock allocation to ride the bull and take advantage of depressed price during the bear.  However, I have yet to have clarity on how to utilise the cash when the time comes.

With a more volatile market this year, it seems more likely that I might dip into my cash. As such, I took some time to think about it and comes out with the following guide.

If my portfolio is down as compared to end of last year’s value AND  the drop is triggered by market correction/crash, then I will

  • start to deploy the first 20% when portfolio is 10% down
  • deploy the next 30% (50%) when portfolio is 20% down
  • deploy the next 20% (70%) when portfolio is 30% down
  • deploy the last 30% (100%) when portfolio is 40% down
  • hold and wait for recovery when portfolio continues to plummet below 40%.

I will most likely look at my existing counters in my portfolio and add more to them in the initial stages. Since these are the businesses that I have done a lot more work on, it really make sense to increase my positions on them. In the later stage, I might look at the counters that are in my watchlist and check if there is opportunity to add them to my portfolio.

It feels good to have a plan in mind, even though there would be some variations when put in action.  Looking forward to execuate the plan and learn from the experience.