How much to buy at this point in time?

With a virtual fund of RM 100,000, the first question we should ask is how much of it should be deployed at this point in time? To answer this question, we must have a sense of the market direction which we can derived from Economic Analysis.

Malaysia market (measured by KLCI) is considerably high at about 1,840 (17 Sep 14), surpassing the pre subprime crisis peak of about 1,400. Market PE is at 16.8x. Based on these numbers, Malaysia market is not at a cheap price.

Malaysia market is rather correlated to US market from a long term perspective. I am a strongly believer that it is the performance of major economies, namely US, Europe, China and Japan that will move the global stock market (using US market as benchmark). Given the correlation, I believe, Malaysia market will move in tandem with the global market.

I believe there are still some upsides to the global stock market. US is on a recovery track, Europe, China and Japan have their issues but they also have enough ammunition to resolve them. China are still in good position to implement stimulus and Europe is on the way to introduce quantitative easing. All these are positive stimulus to the stock market.

From these observations, my position is that we should be cautiously optimistic. Is still good to invest as I believe there are some upside. But we should be cautious given that the market is not exactly cheap now.

With this, I am only looking at deploying 20% (RM 20,000) of my funds within the next 1 month. And the focus will be on Value stocks that gives good dividends to be defensive.