The Best Way to Survive Black December

Today is black Monday and it's really ugly! Our HK Stock Casino tumbled over a 1,000 points this afternoon and panic sell off was everywhere. A Mr. Market asked how he could survive this perfect storm before Christmas. Here are some ideas and suggestions:

• Sell on rebound and cut losses. Some will cut loss at 5%, 7% or 8% and some may hold until 10% or even 20% or more. Set a limit that fits your personal financial conditions or capacity to bear loss. For me, I won't consider any limit over 20% as that would mean you must make 25% on the next stock just to break even.
• Remember cash is King, sometimes. Cashing your stocks should give you liquidity, which is what we all need for the coming holidays. You should think positive too. Instead of seeing further losses or your gains erased in the stock market, you can earn some interest by keeping the sale proceeds in your savings account and you may buy some high-yield currencies when the exchange rates become more favorable. USD is becoming stronger after the release of encouraging CPI & other economic data and HKD being pegged to USD should also get better exchange rates for Euro, NZD, A$, Chinese Yuan, etc. If you are spending the holidays in Japan, the Yen is trading at a low range between 112 and 113.
• Learn your lessons and re-do your homework! You must carefully review your strategy and find out the mistakes you have made. Don't believe what your brokers, your associates or the media have said. There is simply no easy money in the HK Stock Casino; it's only a paradise for the big crocodiles, the killer whales, etc.
• Save your bullets for the battles next year. Check your portfolio, sell underperformed funds, cut unnecessary financial commitments and expenses, and re-arrange your investment allocations for 2008. Remember you should always maintain sufficient cash to cover living costs and unforeseeable for at least 3 months. Never stretch outside your limits. There is a Chinese saying: Having kept the green hill, why worry no wood for burning?
• Lastly, don't let emotions overwhelm you. The worst will happen if you let this downturn spoil your holidays! Cheer up! The stock market will go up again and if you have kept the "green hill", you will have lots of wood to fire.