Posted by belkg > 2014-12-13 19:34 | Report Abuse

To : sosfinance ,any reccomentation ,lost direction

Posted by growthinvestor > 2014-12-14 21:32 | Report Abuse

stop predicting market direction and oil price.nobody can do it.

Posted by sosfinance > 2014-12-16 00:28 | Report Abuse

To: belkg, say, it is assumed you have RM200 (depending on your reserve). You have invested RM100 into fundamentally strong shares (low PE, good growth, dividend higher than FD). There is nothing significant change about the fundamental of the biz, say it dropped 33% to RM67. You buy RM67. If it dropped to RM34 (i.e. drop another 50% from RM67) buy again.

Your total investment will be RM100, RM67 & RM33. Average is RM67. Say you bought at PE of 9X, DY is 5%. At a new average cost, your PE will be about 6X, your DY will be 7.5%.

So, it actually depends how much reserve you have. If you have RM150 and invested RM100, I would buy when it drop to RM50. Your average is now RM75. Based on new PE will be 6.75X and your DY will be 6.7%.

IF YOU HAVE 100% CASH & 100% INVESTED

You will be collecting 7.5% DY, and awaits PE to rebound when the market recover. Say it takes 3 years to go back to RM100, you will have 50% capital gain (RM67 to RM100) + 7.5% p.a. for next 3 years. Your compounding return each year is about 21% for 3 years. If takes 5 years to recover back to RM100, your compounding is about 16% p.a. for 5 years. If the company takes 8 years to recover to RM100, your compounding is about 13% p.a.

This is NOT A RECOMMENDATION, it is just a mathematical suggestion based on experience.