Endowus CIO Samuel Rhee penned an op-ed in the Business Times today, titled "Market predictions could go awry; stick with long-term investment plan" [here].
He reminded how the market forecasters were so pessimistic at the start of 2023, but the major equity markets had actually ended the year higher. He also shared a quote from the famed American economist John Galbraith, who humorously categorized the crystal ball gazers into two groups:
Samuel Rhee ended with some sagely advice for investors, and that is to "let go of what we cannot control - the market direction, economy, or the circumstances of war and pandemics. Focus on the only thing actually within our control: our behaviour."
I couldn't agree more. Through my years of investing, I had never gotten the timing of my stock purchases and sales right. I had bought shares that continued their decline in price significantly before reversing; I had sold positions, only to see them climb higher the next day. What lousy timing!
Recently, I read a book written by a local investor and financial coach. It was published in November 2011. In the book, he had made a bold prediction that the next global financial crisis was likely to hit as soon as late 2011 or in 2012. The financial expert had sold his equity positions and was holding cash to take advantage of the crash when it occur.
But surprise, surprise, the stock markets did not crash in 2012. On the contrary, the S&P 500 Index rose steadily over the next five years (2012 to 2017), ending the period with a 112 percent gain. Factor in the dividends and the index had a total return of 140 percent!
The dip only occurred when the COVID-19 pandemic struck in 2020. Even then, the S&P 500 Index was still higher than where it was at the start of 2012.
Humans are poor predictors of the future. We suffer from all sorts of fallacy, including recency bias. We never know what will happen to us the next day, let alone nail down the next stock market upheaval.
The late legendary investor Charlie Munger once quipped, "All I want to know is where I'm going to die, so I'll never go there." That is a wonderful wish, albeit one that will never come true.
So I am going to ignore where the market is heading and focus on my game plan instead. I will search for companies with solid fundamentals, determine the share price I am willing to pay, put in the order and let time do its compounding magic.
And I am going to hold the stock for as long as my rationale for buying it is still valid, global financial crisis or not.
He reminded how the market forecasters were so pessimistic at the start of 2023, but the major equity markets had actually ended the year higher. He also shared a quote from the famed American economist John Galbraith, who humorously categorized the crystal ball gazers into two groups:
Samuel Rhee ended with some sagely advice for investors, and that is to "let go of what we cannot control - the market direction, economy, or the circumstances of war and pandemics. Focus on the only thing actually within our control: our behaviour."
I couldn't agree more. Through my years of investing, I had never gotten the timing of my stock purchases and sales right. I had bought shares that continued their decline in price significantly before reversing; I had sold positions, only to see them climb higher the next day. What lousy timing!
Recently, I read a book written by a local investor and financial coach. It was published in November 2011. In the book, he had made a bold prediction that the next global financial crisis was likely to hit as soon as late 2011 or in 2012. The financial expert had sold his equity positions and was holding cash to take advantage of the crash when it occur.
But surprise, surprise, the stock markets did not crash in 2012. On the contrary, the S&P 500 Index rose steadily over the next five years (2012 to 2017), ending the period with a 112 percent gain. Factor in the dividends and the index had a total return of 140 percent!
The dip only occurred when the COVID-19 pandemic struck in 2020. Even then, the S&P 500 Index was still higher than where it was at the start of 2012.
Humans are poor predictors of the future. We suffer from all sorts of fallacy, including recency bias. We never know what will happen to us the next day, let alone nail down the next stock market upheaval.
The late legendary investor Charlie Munger once quipped, "All I want to know is where I'm going to die, so I'll never go there." That is a wonderful wish, albeit one that will never come true.
So I am going to ignore where the market is heading and focus on my game plan instead. I will search for companies with solid fundamentals, determine the share price I am willing to pay, put in the order and let time do its compounding magic.
And I am going to hold the stock for as long as my rationale for buying it is still valid, global financial crisis or not.
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