Excuse me, Are You James Bond?

Algoinsights Black Monday of 2020, Blog, COVID-19, Crash of 2020, George Soros, US Stocks Indices, Warren Buffett

On the morning of 9th March 2020, while the whole world was still struggling with the COVID-19 virus, the oil price plunged. Many traders and investors were in a state of shock.

Billions were lost in an instant. The circuit breaker at the exchange was triggered, and trading was halted for 15 minutes to stop the freefall.

It was a day of gloom and doom for most of us in the stock markets. A rude awakening for most. Some called it the Black Monday of 2020.

(https://edition.cnn.com/business/live-news/stock-market-news-today-030920/h_8d7660485359ed2bdce83c74807fb2f3), (https://www.businessinsider.sg/stock-market-news-today-indices-plunge-oil-market-chaos-coronavirus-2020-3?r=US&IR=T), (https://edition.cnn.com/business/live-news/stock-market-news-today-031620/index.html).

As of 16th March, DJIA went -19%, Nikkei went -27% and FTSE went -33%. They are still in the red as of this writing (26th March 2020)

James Bond to the Rescue?

Most people would know who James Bond is. Or maybe you know him as Agent 007.

For the record, he is the man who comes around to save the world from destruction. And usually at the very last minute. This is how he got his fame.

So, what has James Bond got to do with the market crash of 9th March 2020?

Answer: Nothing.

Did he come to the rescue? 

Answer: NO. But Bond Indices did.

The Purpose of Bond Indices

Most traders and investors find Bond Indices a boring asset class. Most think it is an investment asset class for retirees. Slow and uninteresting. No excitement of ups and downs. BORING…….

George Soros once said, “If your investments are exciting, you are probably not making any money.” I agree with him. My investments are so boring that at times I forgot about them until my rebalancing date comes around on the 4th of July of every year.

I believe there is a purpose for every asset class. I also believe the purpose of every asset class when fully understood is to make us rich and wealthy. We got to know their rules to win. However, this is not the case for most traders and investors due to their psychology or their laziness to learn and understand the asset classes they invest in.

Warren Buffett mentioned, “Do not invest in anything you don’t understand.” Need I say anymore?

The Power of Bond Indices

While Bond Indices as an asset class is slow-moving and uninteresting, it has a power that individual Stocks and Stock Indices cannot give and will never have – The power to go against a market crash.

Take the 9th March 2020 market crash as a case in point. If you do not have Bond Indices in your portfolio, then your portfolio would suffer, and you would be stressed and worried financially. This is especially true if you are investing or trading in individual stocks.

The market must move 23.45%, 36.98%, and 49.25% for DJIA, Nikkei, and FTSE respectively to reach their stay-even level. This is not easy under normal economic situations. Now, with COVID-19 and country lockdowns, this is going to be even tougher. It will take even longer.

On the other hand, if you have Bond Indices in your investment portfolio as I have, then you may probably see a different picture. My portfolio went to a low of -5.01% underwater during the crash.

For my portfolio, the market will only need to move 5.27% for me to reach my stay-even level before the crash. A 5.27% gain is a walk in the park even with the COVID-19 around the corner.

At the time of this writing (26th March 2020), my portfolio has improved and is now -1.31% underwater. With governments coming out with stimulus packages to contain the virus and their economies, in no time my portfolio will be in the black again.

Invest Wisely

The purpose of this blog article is to hopefully enlighten my readers and subscribers on the importance of understanding the asset classes before they invest in them. All investments carry risks and are not suitable for all. You want to mitigate those risks with your knowledge and understanding of your asset classes. You don’t want to risk your active income and life’s savings more than what is necessary to create your wealth.

As for users of my trading algorithms, I hope this article would continue to help them grow their investment portfolios with their passive income received from trading the Forex market.

Profitable investing to all.

Victor Ang