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The Weekly Nibble: What To Do When the Stock Market Crashes?

Photo credit: Rafael Matsunaga. Licence: http://creativecommons.org/licenses/by/2.0/

Here are some of the more interesting articles that have appeared in the Motley Fool Singapore’s website over the past week. Let’s explore them.

1. We Are Our Worst Investing Enemies

When it comes to investing, many may not realise but we are our own enemies. In this piece, my Foolish colleague, Chong Ser Jing, looks at how our actions cause our portfolio to perform poorly. An extract from the article:

“Earlier this week, Steven Russolillo from the Wall Street Journal cited data from Investment Company Institute showing that investors withdrew around US$8 billion from U.S. equity funds in the week after Brexit. Stocks in the US fell hard in the immediate aftermath of the United Kingdom’s vote to leave the European Union (they were down 5.6% two trading days after Brexit).

But, according to Russolillo, US stocks “fully recovered from Brexit less than a month later, with many of those investors [who sold from the U.S. equity funds] missing out on the rebound and locking in what should have been just a temporary paper loss.””

If those investors could only sit still and not do anything, they would now be enjoying the gains from their inaction (yes, inaction reaps rewards too!).

2. 1 Type Of Company Investors Should Preferably Avoid

Good businesses are those that are able to generate copious amounts of cash flow year in, year out, with negligible debt. Those businesses tend to be also sustainable dividend payers.

On the flipside, businesses that investors should avoid are those that are unable to bring in consistent cash flow and are steeped in debt. When a downturn occurs, these are the types of businesses that usually get wiped out.

Currently, many companies in the oil and gas sector are at risk due to the potent combination of insufficient cash flow and high debt. Take a look at the article to find out more about such companies.

3. Embracing Stock Market Crashes

Stock market crashes do happen once in a while. The stock market cannot keep on rising indefinitely – what goes up, must come down and conversely, what comes down, has to go up. In that sense, Chin Hui Leong and David Kuo looked at how to be sane during market crashes and what we can do to prepare ourselves. You can check out the article from Chin here and David’s here.

(P.S. A common theme in both the articles is the Oracle of Omaha, Warren Buffett)

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.