1. October 1-17, 2014 is a memorable time for stock market all over the world dropped between 8-12% in 2 weeks.

2. Market recovered about 2-3% on 17 October 2014.

3. During a mini crisis for Bursa small and mid cap, you realise one should be more defensive when the market is more volatile.

4. Hence, you must do your homeowork to shortlist some DEFENSIVE stocks to ride through the volatility.

5. Some of the GREAT DEFENSIVE STOCKS (low Beta) that is with reasonable growth/ROE/PAT Margin and DY (2-6%) are DIGI (0.59), Public Bank (0.77), Maxis (0.39), Wellcall (0.72).  We need to find more GREAT DEFENSIVE stocks (Nestle, Guiness Anchor etc).  Although GENP did very well for the last 10 years (CAGR of 17% p.a.), its ROE is deteriorating and revenue is also dropping over the years.

6.  The GREAT DEFENSIVE STOCKS should be low beta, reasonable revenue & earning growth, strong ROE (>20%), good margin (>20%), decent Dividend Yield (at least 2-6% or more).

7.  GREAT DEFENSIVE STOCKS must comprise at lease 40-60% of your PORTFOLIO, with good track record of CAGR of 15% for last 5-10 years and also HAS potential for next 5-10 years.  

8.  So during the recent VOLATILITY, it is advisable to rebalance your portfolio if condition allow, perhaps increase it from 40% to 60%.

9.  Of course, there are many themes to make a decent return, but during a market downturn, SENTIMENT will overtake FUNDAMENTAL i.e. FEAR will replace HOPE.  Hence, those theme plays like O&G sector (review frequently to ensure growth and high PE still sustainable due to change in crude oil price), Construction (typical Malaysia infra (MRT) play, which may be sustainable for next couple of years), M&A opportunities, small cap stocks with good growth potential (not that many left).

10.  Mr Tong Kooi Ong (veteran investor) lately started his own portfolio with RM200k, although admitted that Bursa is OVERVALUE, he is still participating in the market, perhaps, the volatility won't effect him because he is buying over time and for long term, say 3-5 years at least.

11.  Acknowledging that the market is OVERVALUE, one should be MORE DEFENSIVE gradually, because we do not know when will the MUSIC stops.  Although those theme plays are quite rewarding, during a change of SENTIMENT, the gain can be substantially wipe off within a short period of time.  

12.  In short, during this market, if you still have "reserve", it will be great to take OPPORTUNITY to buy more GREAT DEFENSIVE STOCKS.

13.  Last but not least, always PLAN in advance, say you plan to invest RM300k in 10 years, spread out RM30k p.a. and also ADD in more when market are down substantially (20-50%).  STICK with this PLAN, in your plan, make sure you have 20-30% reserve to take advantage of the market.   Those who are not prepared, whether market is GOOD or BAD, they don't know what to do.  Example, do they take advantage of the recent drop?

www. sosfinancialplanning.blogspot.com  (not all the stocks shown has potentials, although their track records for last 10 years are impressive)

PLANNING

A.  Build up a watchlist (war chest) of GREAT DEFENSIVE STOCKS

B.  Review more frequently on the THEME PLAYS

C.  ALLOCATE your investment size based on your household income and networth (some like regular saving plan, fixed and forced to, like paying insurance premium or income tax deduction.

D.  INVEST OVER at least 5-10 years, don't do all in ONE YEAR unless you are VERY VERY VERY Certain

E.  DON't Forget to have FUN in your INVESTMENT JOURNEY