This post serves to summarises the previous 2 parts and provide some additional personal opinions based on my experience.
As seen from the above table above, each 5-year period experienced at least one stock correction or crisis, yet it is still possible to get good return during the period of time.
I am a very average retail investor and am lucky to have done relatively well with respect to my benchmark ES3 after I became more aware of how to analyse the business fundamentals since 2003/2004.
While luck plays a part, I believe that I can become luckier by putting in the necessary due diligence. However, my due diligence was and still is superficial and there lies a lot of risks in the market. Hence there is also a need to manage the downside.
I have accepted that I will never get my decision right all the time. The key to me getting good enough return is to win larger and/or more often than losing. So going forward these are some of the guidelines that I will continue to follow.
- Set reasonable and achievable goal (currently, at least 8% CAGR).
- Invest only in companies with good fundamentals and management. No S-chip.
- Diversify and maximum position size (by cost) is 10%. This not only reduce the downside of a misstep but increase the chance of a large winner.
- Stay invested always but always keep a portion of cash (currently 30%) as opportunity fund.
- Invest for the long term by using money that are not required in the short term.
The above pointers are not new but through this review, I am reminded of them and hence am more likely to follow.