Friday, March 11, 2011


In the latest Berkshire Hathaway annual report, Warren Buffett talk about conserving an emergency fund for rainy day. It is very true and it is able to pull you thru during bad economy or crisis. Indeed it should form part of our portfolio management and the level of cash should depend on our strategy. This is crucial when your capital base grew bigger and your monthly income is insignificant as compared to your capital. (I had talk about this previously)

Crisis will come in every different forms each time, only a few are able to foresee that. Layman like us, is better to have some strategy in placed. In year 97-98, i was badly hit. Luckily my capital is very very small, that is my pocket money during college days and i knew nothing about share. I bought share merely follow friends recommendation. In year 08-09 i am well prepared for the bad time, was able to snatch some stocks at steal price. Selecting stocks in bad times is easy because even good companies will traded at floor price, however buying is tough. You need to have gut to go ahead which is against the crowd.

In bad times, most of stocks appear to be not safe, you are worrying that they might drop further. In reality it is safe to bet, is all human nature make you feel that it is not safe. Everything appear to be not cheap.

However in good times like now, most people feel that a lot of stocks it very attractive at current prices. They feel that some stock traded a a single PE is undervalue, they assume that this group of stock should command a better valuation. What a turnaround! They start to talk about the future of the company, the balance sheet, cash per share, and etc.

Just wonder why the stock selection criterion has changed so fast!