Newbie advice

[Musicwhiz]

Any forumers can share with me some experience when the GFC strikes. I do remember, I was 13 at that time and it don't really
affects my family much.

There's generally an empathy gap when we talk about a crisis as acute as the GFC. I've been through the crisis and it's changed me in such a way that I will never invest the way I did pre-crisis. But for those who have yet to go through a major crisis, it will be tough to imagine what it felt like.

Basically, there are some aspects you should be aware of:-

1) Focusing on corporate fundamentals is important through the crisis but companies do change during crises as well. It's important not to assume "things always remain the same". Investing demands attention to detail and you need to understand how companies change and evolve over business cycles. A study of history is instructive but every crisis is different.

2) Remaining liquid is very important during a crisis - it's very easy to run out of cash for investments even as prices keep plummeting to new lows. In other words, you must allocate capital very carefully and always ensure you have a steady stream of income, whether through active income or dividends.

3) Asset allocation is actually very important during a crisis - everything is cheap during a bear market (no kidding), so you have to be very careful on how you choose to allocate your capital. During normal or good times, people always target a few companies for purchase "if there was a crash". But a real crash and extended bear market changes our perceptions of what is "cheap" and what is "expensive". If everything was cheap, you don't have the capital to buy everything.....

Hope this helps.