It is earning season in the States (US). The Dow Jones (not particularly liked; being a market-total price-weighted index) will see fluctuations that will fluctuate global stock markets.
US markets recently had a "10% correction" which should happen 1x annually (prior US gov intervention). This correction has occurred twice this year; in February and October. Can these corrections suffice for a 20% correction?
[relevant 10% correction article: http://www.cnbc.com/id/102106829]
Mr Buffett would rightly say always buy undervalued companies. In case of a further 20% correction (that used to occur every 3.5yrs that is long due now), your unrealised losses should your stock price accord the market, be minimal.
Hence, the answer would be maybe yes, maybe no.
Notice that all mega investors as such Mr Buffet, mr Li Ka Shing, Mr Al-Waleed bin Talal have all invested in undervalued companies successfully with a key ingredient. Cash.
During the roughest of times, they have all invested what cash they had accumulated into now cheap, quality stocks and companies.
In other words, they invest in cheap/undervalued companies all year round while keeping a good amount of cash in case of any market correction.
This is also the strategy of Tan Teng Boo the captain of Capital Dynamics, a closed end fund with about RM1bil AUM with similar value investing tactics of previously mentioned mega investors
(opinion after attending iCapital Investor Day + researching on iCapital's historical investment style).
[iCapital.biz Bhd is a Malaysian listed public company managed by Capital Dynamics]
Fear not, for traders & bulls, this would be a great read - by Ken Fisher (Forbes 500 Investor) ;
http://www.forbes.com/sites/kenfisher/2014/10/15/the-secret-indicator-that-bulls-will-love/
In conclusion, look for companies bearing high dividends (min- market risk free rate:current MGS/ 10 year bond)
that have historically low prices NOT due to its core business or companies that are turning over a new leaf / to profitability (should you time this event well).
& maintain certain amount of CASH should you feel comforted in case of a correction you may get discounts all across the board. However, Mr Ken Fisher would tell you, comfort should not be inherent in investment management. For usually if you are comforted in making an investment decision, you would not make as well a decision as someone who wants to invest all his cash in stocks and still be able to withstand corrections.
A small confusion is always intended. Confusions will help us all develop our own personalized theories, philosophies and ideas in investing upon cracking our heads in making sense of everything.
Happy investing until next time.
