Some people said that investing is all about timing, some said it boils down to luck. To me, investing is half science and half art. Sometimes you can analysis as much as possible on a particular stock but when the market suddenly crashes, all your profits and capital will be gone. That’s the hard reality.
Therefore, successful investing also requires the right skill to make critical judgement call and look at things from the big picture. To be a winner, you must remain calm in the face of market swings, and be prepared to go against the crowd. That will not be easy, and not many people, including myself, can achieve that. But if you are able to do so, the rewards can be substantial.
The difficulty of assessing a company lies in the qualitative analysis. This is because it is not easy for investors to come up with the intrinsic value of the business, especially for those novice ones. I have seen many Singaporean finance bloggers making investments in local stocks based solely on NAV or P/E. Some of them also invested in Reits or ETFs, with investment criteria based solely on potential dividend yields. These are very narrow measures to gauge a company and may not reflect accurately the value of a stock.
Most Singaporeans don’t even bother about the fundamentals of the business before making investments in stocks. Many of them buy shares of company whenever there are media reports of new contracts secured and panic sell when stock prices fell. Many Singaporeans don’t even understand the concept of asset allocation and thought that investing is all about stock investments. Many also don’t appreciate the importance of diversifying their portfolio in gold
To be a good investor, we must not only focus on the fundamentals of the company, but also the macro economy. This means that investors has to read broadly and sense-make the surrounding environment. Keep an open mind and always have the desire to learn new things. This will require a lot of discipline and efforts, especially if you have family or other commitments. But once you have developed a habit of reading, your sense-making ability for investment analysis will improve.
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SG Wealth Builder