The bull market and Bear market, both are the characteristics of Bursa Malaysia. Many KLSE traders plan a strategy for a good time in the market. They expect the best from the market but when they face the bearish market they are left with no ideas and they suffer great loss. In planning a profitable strategy they forget about a back-up plan for the market recession.
A successful investor such as Warren Buffett or Ray Dalio always follows one very crucial investment strategy i.e. be prepared for all weather condition in the stock market.
Ray Dalio Says
“When you look at most portfolios, they have a very strong bias to do well in good times and bad in bad times.’’
Therefore to become a money-smart, you have to be ready for a bad time. Boom and bust in the KLSE investment market will always be there, therefore, it is your responsibility to design a plan that can back you up in bad times as well.
There is no recent market upside down which shows a bad market condition but there are a few expectations of the market recession this year.
We are here to help you to design a plan for a bearish market.
Multi Management Future Solutions has done the research on what global investor do in the bearish market and how they proceed. With our expert team, we have designed the 5 investment ideas that will help you to deal with the bear market in Bursa Malaysia.
Here are top 5 investment ideas for bearish KLSE market–
1. Focus On Dividend
The dividend is the return that a company gives to its shareholders when it earns a profit. Bluechip stocks and REIT usually gives a high dividend on a regular basis. But there are companies which are profitable but they are neither bluechip nor REITs, that is why you have to do deep research in Bursa Malaysia listed companies for the dividend paying company.
Dividend income is the main source that motivates investors to invest in companies. If the company is profitable and have good dividend history that means it will pay the dividend in the bear market situation.
2. Bond Rating Is Important
A bear market happens when the economic times are tough but the good thing about the bearish market is it shows which company has higher debt and which company has the power to deal with the debt.
But if you are aware of bond rating you can avoid the last minute suffering from the weak market. Every country has one rating agency to rate the companies. These ratings actually give the big picture of the company’s creditworthiness.
In Malaysia, one of the famous rating agency is RAM Rating Services Berhad. The company provides corporate ratings, structured finance ratings, Sukuk ratings, project finance rating and financial institutions and insurer ratings. It is mostly for banks, multinationals, insurance companies, and other financed entities.
The other international rating agency is S&P and Moody’s. They also rate companies according to their performance and credit. A rating of AAA is the highest rating, including ratings of AA and A, they are considered as “investment grade”.
You can do the research about the companies listed in Bursa Malaysia whether the company is poor rating (B or C grade) or investment grade rating. In this way, you will not be worried if the market goes down.
3. Hunt For A Good Stock To Buy
When the market goes down both good and bad stock goes down. The bad stock remains weak and takes time to recover whereas good stock has the potential to recover soon. Bearish Market will give you the good stock on sale. Keep the list of good stock ready and when the market goes bearish buy the good stock, you can get the high return with this stock as the market rise in the future.
4. Diversification Can Save You
This is the most important factor to save you from risk during a poor market performance. Diversification is using different types of investment strategy and investing in more than one type of stocks. You can use exchange-traded funds (ETFs ) to diversify your portfolio.
Bursa Malaysia ETFs are of three types of fixed income ETFs, equity ETFs, and commodity ETFs. These ETFs consists of baskets of stocks, bonds or commodities based on an index which instantly offers broad diversification and prevent the risk involved in owning stock of a single company.
Different stock performs differently during the times of ebb, therefore diversification will act as a defensive wall for your investment.
5. Patience Is The Key
If you are in KLSE stock market for the long term and you are not retiring soon then you need to be patient during the market turmoil. Good stocks come out of recession and become ready for the bull market.
Don’t take hasty decisions during the time of bearish market to leave the market. Long term investment in the stock market pays you back with good money. There will always be ups and downs in the market, be patient when the market goes down and take money-smart decisions.
Bull or bear, you should be ready. A smart investor will always be ready to face the music. If you follow the above investing advice during the bearish market with a smart decision, you can refrain yourself from the great loss.