Just Put in Another $5000, it’s a Good Time to Invest (21 Oct 2009)

I just invested $5,000 more today. It was placed in the following funds.

ING RF Emerging Markets Debt HC EUR - $1,500
FLF Equity Europe Emerging EUR - $1,500
Legg Mason SEA Special Situations - $2,000

Firstly, the current market situation is that stock markets have obviously risen, but many investors are caught on the sidelines, or sold out too early. Many are very wary of going in at current prices, and wondering if it will come down. There are no obvious signs that the market is going either direction in the short term, hence all the uncertainty.

What I do know is that I am far more patient then the market, which tends to have a very limited short term outlook. Things are now slowly and surely getting better around the world. It just won’t be defined by any one single event where you wake up and suddenly, it seems like the recession is “over” and we are in boom times. If the market looks expensive now just because it has risen 50% over the last 6 months, you could fast forward 1 year and you might again in hindsight say it was still cheap now. But because no one has a confirmed crystal ball, hence there remains so much uncertainty. But for a unit trust investor like me, where I am not so concerned about the short term fluctuations, I would still “dare” to buy now.

In addition, valuations are not demanding. Forward 2010 valuations for most Asian markets are below 15 times PE, which is very reasonable, and that’s for US and Europe as well. The year 2009 is a very low base for many companies, since most were still doing badly in the first and second quarter. So, next year’s numbers are almost certainly going to look better compared to this year’s numbers.

As always, a portion of the money was invested into bond funds. The minimum subsequent investment for the ING Emerging Market Bond fund is higher than $1,000, hence I put in $1500.

The investment into Europe was because I have too much exposure into Asia, so even though I continue to like it, if I don’t add to other regions outside of Asia occasionally, soon I will be even more heavily tilted towards Asia. Its hard to practice what you preach yourself, so, yes, despite all the diversification benefits and strategies that I always talk about, I am sometimes guilty of not following strictly to them myself either. Hence from my portfolio, one can see that I am obviously overweight Asia in a big way, and probably more than is healthy.

The addition into Legg Mason SEA Special Situations fund reflects again my bullishness for Asia. I find the fund a good counterpart to the Aberdeen Pacific Equity fund, which is more value driven. This fund is more aggressive (its performance is more volatile), but it can really move up when the market runs. And from my perspective, we are in a rising tide. So, it’s a matter of time.

One day within the next few months, for no particular reason, the market will move upwards decisively over a period of time. This is because as people leave the year 2009 behind and start to focus on 2010, they will start to feel more optimistic, and many will realise that things are actually looking much more positive. Analysts will be revising earnings for 2010 upwards into the new year, and suddenly, without any particular event, the market will move upwards further.

It doesn’t seem like it now, but that is precisely why we should invest now. Investing when the whole world including your next door neighbor is screaming buy is not the way to go. But investing when most people are uncertain, are still waiting, that is how I plan to make money.