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What are you doing with your shares portfolio in the current crisis?

Discussion in 'General Investing Discussion' started by tropic, 17th Nov, 2008.

  1. tropic

    tropic Well-Known Member

    Joined:
    13th Sep, 2006
    Posts:
    131
    Location:
    WA
    I like to know what you are doing with your shares portfolio in the current crisis?
    I hold mostly blue chips shares and have seen the value dropped by over 50% so far.
    It is concerning because I now borrow 65%. It used to be a a lot smaller percentage wise but it's changing daily since the value has been dropping so fast.
    Now I am thinking maybe I should sell some of my Asia fund to benefit from the lower AUS dollar even thought I am still losing money to reduce my borrowing level.

    Have you been sitting still and watch how the whole thing unfold and hoping it will bounce back? Or have you been taking losses to reduce borrowing?
    The issue is no one seems to know where and how it will end.
     
  2. crc_error

    crc_error The Rule of 72

    Joined:
    1st May, 2007
    Posts:
    1,367
    Location:
    Melbourne, VIC
    I have learned one thing. Not to use margin lending!

    Its margin lending which forces you out of the market at the wrong time!

    Since your stock is down 50%, you can continue to hold, and enjoy nice 8%+ dividends. However if your geared, you will be forced to lock in your losses and you will never enjoy the upturn when it happens.

    I have been caught with it today with OIF falling 30%. I still like the stock, and would be buying more today, but can't cause I had to cough up cash to bring my margin loan back into order. Fortunatly I have money in my offset account which will settle the loan for now, but who knows what will happen tomorrow.

    I think from now, pay cash for shares! or use redraw where you cant be margin called.

    I think best is to hold your stock if you can, but certainly reduce gearing or even get rid of it all together.
     
  3. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    Tropic

    I've only recently started rebuilding my portfolio. (I've suffered some losses since but it's nothing to lose my sleep over)

    I agree with you, things will turn around one day but when and can you wait?
    If it was me I'd lighten up the portfolio and reduce the margin loan but what do you sell?
    I'd probably sell the Asia fund and those stocks which suffered the least.
    My thinking is that those particular stocks are still relatively expensive and are likely to see smaller capital gain in the future.

    In regards to the other shares, they've already lost a lot of their value so maybe you can keep them?

    cheers
     
  4. tropic

    tropic Well-Known Member

    Joined:
    13th Sep, 2006
    Posts:
    131
    Location:
    WA
    I don't have margin loan, all my borrowing are on equity loan.
    So far I don't have problem servicing the loan because the dividends pay for large percentage of the borrowing cost and we both work. This is based on the previous interest rates and dividend payments.
    Because IR has dropped 1.75% in the last 2 months the borrowing cost has gone down too. On the same time some of shares that I have most probably will pay less dividends, some might even stop all together until the condition improves.
    Maybe selling my Asia fund is a good idea, it will reduce the borrowing to 50%.
    It is a tough situation when even the experts have no idea how long/deep/severe this crisis will go.

    Hopefully we hear more positive news soon and the market find some level of stability. It is a bottomless pit at the moment.
     
  5. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    Tropic

    I know what you mean, I guess you'll still need to restructure your portfolio
    and to position yourself for further buys down the track (when the situation changes).

    cheers
     
  6. sphinx

    sphinx Member

    Joined:
    5th Jan, 2008
    Posts:
    12
    Location:
    syndey, nsw
    You haven't learned. You will learn when you know margin lending has saved you by kicking you out of the free fall market early.