Just added $10,000 to my portfolio (17 June 2009)

I just bought into 4 funds on totaling $10,000. These consisted of:

Aberdeen Pacific Equity - $4,000
Legg Mason SEA Special Situations -$4,000
Fidelity US High Yield USD - $1,000
Fidelity Euro High Yield EUR - $1,000

I will update my portfolio when the transactions are completed and priced.

I advocate buying on dips these days as a strategy. And to me, the fall in markets on Monday and Tuesday were sufficient enough as a “dip” for me to buy in further. A correction is normal and would have happened sooner or later.

The key question I ask myself, as an investor, is why I am investing? The reasons are many, but the biggest reason is that the economy recovery still hasn’t happened, and hence it is not fully priced in yet. There are far more people out there who are not going to re-enter markets until they see irrefutable data that an economic recovery is at hand. And by that time, it will be too late.

In the meantime, the stock market is like a boy that gets bored too easily. There is nothing exciting about waiting for the global economy to right itself because it won’t happen tomorrow, much as we want it to. And thus, boredom, profit taking, will cause the market to dip or go through various corrections.

The market may have priced in the initial stage of the recovery (still debatable), but it certainly can’t have priced in anymore than that, because it is only forward looking by 3 to 6 months. So, it can’t have already priced in a full recovery.

I am willing to be patient, and to look past these super short term gyrations of the stock markets. In fact, it is these dips that present me with the opportunity to go back in and acquire more investments at lower prices. I have time on my side. There are already signs that the economy is bottoming out (though still just “green shoots”), we will eventually arrive at a time when the recovery is irrefutable.

What some of you will notice though, is that I actually have two bond funds in my additional investments this time round. While I do like high yield bonds at this stage, a bigger reason why I have these are due to diversification. Even if they are just 10% to 15% of my portfolio, this is an asset class that does not move in line with equities. And it is always prudent to diversify.