My biggest lesson in investment is to learn how
to constantly keep my emotions in check. Whenever emotions take over, we tend
to easily lose discipline from our original gameplan.
Sounds familiar?
I made many “emotional” mistakes at the start of my investment journey. In
2011, I bought SGX when its share price rose suddenly. But after my purchase,
the price dropped. Ok, my luck. Thankfully, the dividends were not too bad and
the price recovered 3 years later. Twice I bought SIA and both ended in similar fate. I sold them within months at a loss when news on sharp reduction
in global oil supply circulated. Then, I justified to myself that it was just a “cut-loss”.
Was this part of my plan? Honestly, no. And I did not have a better answer why I did so. Thinking back, it was simply reacting based on emotions.
So how did I keep my emotions in check now? As a fundamental investor, I simply focus on numbers only i.e. to buy when price is at least 10% below its intrinsic value, and sell when the price is above its intrinsic value (usually from 20%). Using numbers has certainly helped me in making many rationale investment decisions and maintain my discipline. Sharing a quote from Mr Warren Buffett...
So how did I keep my emotions in check now? As a fundamental investor, I simply focus on numbers only i.e. to buy when price is at least 10% below its intrinsic value, and sell when the price is above its intrinsic value (usually from 20%). Using numbers has certainly helped me in making many rationale investment decisions and maintain my discipline. Sharing a quote from Mr Warren Buffett...
There might be some “feel-good” sentiments in the market including temporary easing of trade war,
extension of oil supply cuts by OPEC & Russia, potential interest rate cuts
by FED, etc. It might be easy to get really optimistic and buy into the market. Before
deciding to go aggressive, it could be useful to first take a step back. Consider carefully whether this is part of your investment plan, or whether your remaining finances are sufficient for daily livelihood without having to sell your stocks, even if the market crashes tomorrow.
Returning to my investment principles, most
importantly to first set aside the money for our family’s immediate needs
and only invest with spare cash that I could afford to hold/lose.
Looking forward to hear from you too!
GoHuat
GoHuat
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