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Thursday, 13 May 2010

Hold Cash To Exploit Market Turmoil

Did you have enough cash when the stock market plunged to its lowest points between late 2008 and early 2009? If you did, and you were confident enough to buy stocks, you would have made good money using the market cycle investing strategy.

Someone told me he had very much wanted to buy some cheap shares at around that time (blue chips were selling at below 50% off their peaks), but he did not have the money. He never believed in holding too much cash and had always spent the bulk of his income paying for insurance premiums, regular saving plans and loans. He thought it was “wasteful” to hold cash. The meagre interest that banks pay was too low in his opinion. But he’s having second thoughts now.

Another person I know saved up conscientiously, keeping the cash in low-interest savings accounts while waiting for the right time to enter the market. He didn’t mind the low interests as he knew he would make 10%, 20% or even 30% return averaged out over the years spent waiting for the right opportunity. Instead of giving money to “professional fund managers” to deliver some “projected 9% return” (which usually never materialize), he would rather manage his own investments in his own way.

Given the recent financial crisis in Europe, there may be a good chance that the stock market may tumble to attractive lows. It will possibly be market turmoil once again.

Do you have the cash to take advantage of it?

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