We are Wolves

Once upon a Saturday morning, I heard a slightly muffled 'bang' and the muffled screeching of tires followed by a very muffled pained cry. Startled, I looked out of my window and saw the back of a 7-seater Honda sticking out of my void deck (which is the ground floor area of a high-rise residential building).

The first thought that came to my mind was: Is the driver hurt? Did anyone call the ambulance? Afraid of jamming the ambulance lines, I looked around the accident scene and at the opposite apartment block to see if anyone was making a call. Then I witnessed something I could never quite forget.

Windows of the opposite block started opening up and everyone was armed with it. Some carried big ones, some small. Others held it with one hand while the shakier ones held it with both hands. It came in SLRs, mobile phones and compact digital. Everyone had a camera.

I looked at my own block and I saw this man, 4 levels below me, armed with a SLR leaning over his window ledge trying to get a clear shot of the Honda. He looked like he was going to topple over anytime. I reeled with disgust at this typical Singaporean behavior but I decided to indulge in my national identity and joined in the photo fracas. I even went one step further by going downstairs to take a close-up picture (which cannot be posted here because it captured the license plate of the vehicle and the driver's anguished look).

Now I must admit this is a poorly taken picture but I was under pressure (with all 500 residents of the opposite block looking at me) but the moral here is that we behave like wolves. Wolves hunt in packs to trap deer and we click in packs to trap unfortunate drivers.

The recent volatility in the markets has led many to believe that the US is in recession and to claim that it is a bad time for investors. The sub-prime incident was bad news and if there's anything worse than bad news, it is uncertainty. Uncertainty keeps investors away and stoke the fears of recession further.

What then would be a good investment strategy for this period of uncertainty?

Wolves would split into groups to surround a herd of deer. Each group would take turns to charge at the deer, driving it to a group that is already in wait. Hence a wolf strategy involves complex planning at minimal expense. A deer strategy is blindly following the crowd without any planning.

Many propose that it would be good to invest in bonds and fixed income securities for the time being but with the vast majority going into the fixed income market, driving prices of bonds up, would that be a wolf strategy or a deer strategy?

A wolf strategy in this period is to stay invested and stay diversified. Taking the Straits Times Index (STI) as an example, after the 1997 Asian crisis it dropped from a record high of 2493 to barely over 900 points. Fast forward 10 years, the STI index hit another record high of 3800 in 2007.

Do not be mistaken. I am not encouraging you to dump your money into index funds for a 400% return. However index funds are one of the most diversified assets and I would strongly encourage such investments. Ho

Do not be put off by the volatility and pull out of the market. Remember this: We are Wolves.