Monday, 30 September 2013

The Hunt for RED OCTOBER!

For unit trust investors invested into equity related funds, the past one week should see your gains reduced in parallel with the minor drop of the Kuala Lumpur Stock Exchange from high of 1801.83 points on the 20th of September 2013 to 1776.16 points as of 27th of September 2013 (last Friday).

Downside Volatility KLSE

Further downside is seen in the local Bursa today (30th September 2013), shedding -10.33 points as of 10.54am.

Red Monday
This drop today was largely triggered by news released yesterday that the US Government might shutdown come Tuesday night due to Democrats and Republican at loggerheads about the following issue:

Politicians at Loggerheads!

Once again political disagreement rears its ugly head in the US Senate as the resulting deadlock of the above mentioned issue will create further instability to the economies and stock markets worldwide. 

What to Expect?
The KLSE for the coming week is expected to be worst if there is no conclusion to the US Government Shutdown Agenda. The Dow Jones tonight should see a sizable drop as US investors exit the stock market for temporary safer investment haven while waiting for the issue to be resolved. 

With Budget 2014 to be announced by the end of October 2013, we should expect spending cuts by the Government (no more gula-gula for the rakyat) and the introduction of GST to address the debt issue faced by our Government. 

Pening...hutang banyak!
All in all, I'm expecting a so called "RED OCTOBER" for our local stock market. For those whom have invested in unit trust, here's my recommendation:

Recommendation According To Strategy Used:
1) Existing Dollar Cost Averaging Investor - to continue the strategy and possible entry of additional investment after Budget 2014 to purchase more units at lower price.

2) Existing Lump Sump Investor - this is a sticky situation as it depends on the investment horizon. If are already making gains of now, perhaps you might want to consider realizing your profits. This can be reinvested after Budget 2014. For those whom are in the red, you can consider averaging down your unit price by making additional investment.

3) New Investor - be patient and wait for the opportunity to start your investment after Budget 2014.

The above recommendations are general guides for long term unit trust investors. Do take them as a reference in decision making. Different investors have different investment goals and purpose, therefore there's no one right/correct/suitable recommendation for everyone. Do seek respective unit trust consultant for their views and decide what's best for your investment portfolio.

For every downside of an investment, there lies an opportunity for one to profit. One can never eliminate risk from investing, however one can also take advantage of risk and turn it into an advantage. 

Cheers and Happy "Red October"!

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