Holding on to the Winners

The year 2015 started off with news that introduced volatility to the stock market. Crude oil prices hit a 5-year low, the Euro slipped to a 9-year low against US dollars amid Greece woes and the Swiss Franc unpegged from Euro. All these economic news are causing huge stock market movements in different directions.

Your positive portfolio may seen a sudden drop in your unrealized profits, or even moved into the red zone, causing panic and wondering if you should continue to hold on tight and bear through the rough waters or to ditch ship with worries that the stock that you own will sink on the next wave that will hit.

Many a times people will tend to drop the stocks in their portfolio during uncertain times, hoping to save as much of the unrealized profits as they could and when the market turns around, they will watch in regret that they had exited their winning stocks.

So how should an investor decides whether if they should continue to hold their position and continue to ride along with their winners?

Knowing the company’s fundamentals

Even before investing in a company, it would be good to understand the fundamentals of the company. Not only would it be helpful to understand the company, understanding the company fundamentals thoroughly will help to reject any unfounded fears when the company stock price is being pulled down by the market.

Staying focus on weekly charts

Weekly charts are your friend when it comes to long-term investments. With lesser fluctuations in the charts as compared to the lower time frame charts like the daily or intra-day charts, weekly charts can help to smooths out noise on the lower time frame charts.

Selling only on signal

On some weeks, due to economic news, the stock price may be affected, causing the weekly chart to show one black bar. Having a bad week does not mean that it is time to sell the stock. Do take a closer look at your technical analysis and ask yourself if the sell signal has been triggered.

Bottom Line

The price of a company’s stock is usually affected by the market forces and economic news. However, the value of the company is dependent on the fundamentals of the company. Looking at both the technical chart and fundamentals of the company will help an investor better decide on whether to continue holding or to sell to wait for a better opportunity.

The Importance of Great Leaders

The year 2014 ended with a sombre note. An AirAsia (KLSE: 5099) flight, QZ8501, crashed en route from Surabaya to Singapore. While some of the corporate executives decides to stay off social media, allowing their professional handlers to manage the crisis, AirAsia CEO, Mr. Tony Fernandes, stood out and turns to Twitter for crisis management.

What does this mean to investors?

Corporate executives are the leaders of the company they lead. During ordinary times, good leaders are the one leading the company to scale greater heights. But it is usually great leaders are the one who leads the company and walk them out of any crisis the company faces.

A company is not just lead by the corporate executives. The board of directors within a company are all leaders of the company. They are also the ones who shapes the direction of the company.

Confidence in the leaders

Having confidence that the leaders of a company with the ability to lead is one of the factors why investors are willing to part their money and invest in the company. In the AirAsia case, the loss of a plane has got a devastating effect on the company. However, from the stock chart of AirAsia, although the price of the company “gap” down on the day of the crash, the incident did not send the price of the company plunging down. This shows that the investors are still confident about the leadership of Tony Fernandes and his team.

InvestorMonkey - AirAsia stock price when the crash occurred


Bottom Line

Most companies will have their share of crisis and only those with great leaders are usually able to survive during times of crisis, prevail and continue to grow. To see how leaders of a company react during a crisis will allow investors to decide whether to continue to follow them or to pull out their investments as these are the people who should be the one who lead the company to scale greater heights on ordinary times and lead the company out of a crisis.

PK-AXR A320-216 Indonesia AirAsia by Steven Byles is licensed under CC BY-SA 2.0.

Portfolio Update (December 2014)

Finally have some time to sit down to write this post, after settling down from my recent overseas trip. It is already the start of a new year and for many of us, it is time to sit down and look at the past year report card and to decide on what we should be doing in this coming year.

Continue reading “Portfolio Update (December 2014)”