All right, ever since the Chinese regulators found the silver bullet and pulled the trigger, the Shanghai composite index lost more than 500 points and a lot of people lost money or gave back the gains they already made, some of them are “crying foul” for the goverment action. Well, in stock market, just like in NBA, complaining to the referee usually won’t help. We should focus on what we can do to “stop the bleeding”, or “protect the gains”.
I’m not trying to predict what the market will go next. Last time just as I thought about “Shanghai composite 8000” for fun, the guys in Beijing brought me back to the reality. I think the best we small investors can do is:
1) Sell speculative stocks in our portifolio. Because the downside of those stocks is still there. Whether you make money or lose money on them, take them off the table. Don’t try to catch the falling knife. We don’t want to be the hero in this uncertain market.
2) Looking for bargains in good names, e.g., CMB (600036.SS), Moutai (600519.SS), Vanke (000002.SZ), etc. If you look carefully at the percentage drop of individual stocks, you may find the good ones such as CMB did not drop too much, compared to the speculative ones (if you have some).
I remember Mr. Wang Shi (the chairman of Vanke) once said: in business if you make money quickly, you will more likely to lose the money quickly. He was talking about the “easy money” he made in his early days doing “international trade”. This very well summarize how some speculative stocks did to many investors (speculators to be accurate).
3) Last but not least, I think it’s a good time to take our eye balls from the computer screen, from the brokage houses, focus on our daily work. Better yet, take a vacation if we made some money. Pick a book written by Peter Lynch or Warren Buffett. Not those “trading strategies”, “Get rich quick” books sold all over the bookstores.
When we get back from vacation, we may find some real good stocks on sale 🙂