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Strategy in 2009 Stock Market

19 August 2009


After a tough difficult year, the global economy has apparently passed through the worst financial period in decades. Last week, France and Germany reported that their Gross Domestic Product (GDP) resumed growth in the second quarter. In Asia, Hong Kong reported that its economy expanded again after a yearlong recession. Last Monday, Japan also announced that its economy expanded a 3.7 percent growth in the same quarter.

Some impatient investors might anticipate a V-shaped recovery, a steep plunge to the bottom and jump up like a rabbit, in the stock market. Nevertheless, politicians and economists caution ordinary citizens and investors that the recovery will be shaky. A full solid recovery is not coming forth instantly. It will come only after the employment level rises again and the consumers start spending.

In an interim report meeting of Cheung Kong (Holdings) Ltd, billionaire Li Ka-Shing advised the Hong Kong investors be careful in speculating in the stock market, in spite of the solid growth in overall results of his company for the half year ended 30th June. He said the market had gone to a high level and told his shareholders not to borrow money to invest, especially in margin buys. On global economy, he said "If you say it has turned better, it is too optimistic and need wait for more time, but the worst has past. From the angle of global trades, it is quite clear. For example on the figures of freights of any countries, no matter in Asia or in Americas, the most worst time has already past, though it is not an instant V-shaped rebound." (a translation from an article in a Chinese newspaper)

For United States and Canada, the economists have been forecasting a recovery in the third quarter but the unemployment will rise to highest level of about 10 percent at the end of 2009, and the equity market will be choppy in the recovery,

My Own Tactics

Using a conservative strategy, I adopt a bold active approach in investing - keeping up and involving diligently in the market movement. With a small capital, I used to keep only a few stocks and traded only a few times a year in the past. In the beginning of 2009, I had abandoned this approach and diversified my portfolio. At this moment, the portfolio holds about 40 stocks and funds. The disadvantage is the higher costs in fees and in time management; the advantage is the mobility of capitals in risk exposure and in freedom of fine-tuning the portfolio. Some would say the mousy trader's tactics would reduce the gain in the market. However, with the uncertainties in the economy, I believe the tactics would be applicable to my situation. The result is that my portfolio has produced healthy revenues in the first quarter. Reflecting the uptrend in the market, it also registered modest realized capital gain and dividend income in the second quarter, 50% and 60% increases, respectively, from those of the first quarter.

To date, the stock market in North America has turned to a higher level from the lows in March 2009, though well below the pre-crash levels in October 2008. For the near future, I would think a cautious approach might also work, because the world is not just going through a simple recession but also experiencing extreme changes in the environment and it is probably aligning itself with emerging economic and military powers.

Archive: General Strategy for 2008


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