Invested $1500 and switched more to equities

Fear is very much prevalent now, with markets sliding every other day, and big drops too. But when there is a lot of fear, it usually means it was a pretty good time to buy. Valuations now are cheap. Even if you have no faith that the western countries like US and Europe can get their act together, Asia will still continue to grow and expand because we have reached a certain critical mass now. While markets haven’t decoupled and if western markets continue to fall, Asian markets will also be affected. However, Asian markets will rebound much faster simply because fundamentally, Asian economies are on a much stronger footing.

I bought another $1500 into Aberdeen Singapore equity on Monday and switched another $11,700 into Aberdeen Asia Smaller Caps as well (the switch buy will take place today on Thursday). As of now, I have switched 2 out of my 3 bond funds into equities. I only have the Fidelity Asian High Yield Bond Fund left. Will wait and see before I commit to switching that. So far, markets are down easily 15% from their peak this year. If it drops further such that we hit bear market territory and the market is down 20 to 25%, I will switch my last bond fund into equities.

I believe the market crash this time round will not be as big a fall as during 2008. Overall valuations of stock markets were much higher then and we were coming off a period of a few consecutive bull run years. This time, for western countries, the economy had barely started to recover, and after a rebound year for Asian markets in 2009, 2010 was a fairly mild year. So, the down side is not that large. In fact, stock markets weren’t really expensive even to begin with before this while crash started, and now they are looking cheap.

We just went through this 2 to 3 years ago. The best time to buy was when everyone is selling in fear. Because no matter how bad things look, markets will eventually recover. If we recovered from the Lehman Brother’s crisis that last time, then we will recover from the US downgrade crisis this time. Actually, US being downgraded to AA+ in itself isn’t even a crisis, because everyone is still willing to lend US money and nobody reasonably expects the US to default on its treasury bonds AA+ or AAA otherwise. But markets are nevertheless falling to this, and sometimes, when enough people sell, it can be a panic onto itself. Right now, fear is prevalent. So, right now, I am buying.