Supporters of long-term investing would probably be familiar with famed billionaire investor Warren Buffett?s pithy quote – ?only buy something that you?d be perfectly happy to hold if the market shut down for 10 years.?
In other words, Buffett?s truly happy to ignore the stock market when he invests and would prefer to focus on how the businesses underlying his stocks will evolve over time. At Motley Fool Singapore, we also champion long-term investing and believe that buying and holding shares for years in profitable and growing companies…
Supporters of long-term investing would probably be familiar with famed billionaire investor Warren Buffett’s pithy quote – “only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
In other words, Buffett’s truly happy to ignore the stock market when he invests and would prefer to focus on how the businesses underlying his stocks will evolve over time. At Motley Fool Singapore, we also champion long-term investing and believe that buying and holding shares for years in profitable and growing companies is a great way to build long term wealth. But, as it is with most things in life, it’s easier said than done.
That said, short-term market fluctuations can really be insignificant in the grand scheme of things and we shall see why.
In the year ending 13 May 2013, the Straits Times Index (SGX: ^STI) gained 19.7%. We choose two stocks that did significantly better than the index and two others that were stinkers, with price performance being the only basis for selection.
The former pair consists of canned-fruit and vegetables producer Sino Grandness (SGX: JS5), which gained 254%, and instant-beverage manufacturer Super Group (SGX: S10), which increased by 153%. The latter pair consists of palm-oil industry players Golden Agri-Resources (SGX: E5H) and Wilmar International (SGX: F34) which lost 23% and 16% respectively.
The graphs below show the number of days in which these four companies had made gains, losses or stayed flat. By looking at how Sino Grandness and Super Group performed over the year, it might be intuitive to think that they spent the majority of the year in the green. But, it just isn’t so.
For example, Super Group’s graph would have shown it to have an almost equal proportion of winning (44.4%) and losing days (42.8%) even though its share price more than doubled over the year. In fact, all the graphs displayed this similar trend, with the two big losers also having almost the same number of winning and losing days.
If Sino Grandness’s investors (or investors in all other companies, for the matter) were spending their time fretting over whether it would rise or fall the next day and were basing their buying-and-selling decisions on that, they would have well and truly missed the forest for the trees.
It is common to be distracted by short-term price movements but let us put on our Foolish hat here: focus on the business and think long-term.
Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo , Take Stock Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.
The Motley Fool’s purpose is to help the world invest, better. Like us on Facebook to keep up-to-date with our latest news and articles.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.