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CDP is Paramount

ConvictionTo be a successful investor, an investor needs to have CDP, not the CDP we all know, but rather conviction, discipline and patience. Without these traits, it would be hard to build a portfolio that will have a bright future for you, financially.

Conviction

Before purchasing a stock, we need to have the confidence in the business. We need unwavering belief in the business model and that the management will do the right things to compound our money. Benjamin Graham said: “You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.

If you had faith in Olam International Limited (SGX: O32) before Muddy Waters intervened, that faith should not be destroyed just because someone cast a negative light on the company.

When you make a decision, you must stand up for it and own up to it. You may not be right 100% of the time, but it’s better to be right most of the time than be totally unsure all the time.

Discipline

Secondly, discipline is important. In the short term the market a voting machine. In the long term, it is a weighing machine.

For example, let’s say you bought Raffles Medical Group Limited (SGX: R01) after analysing it. You bought it at $1 after determining the intrinsic value to be at $1.50. It is undervalued by around 33%. You intend to hold the stock till it reaches its intrinsic value. Suddenly, the next day after you bought the stock, there was negative news about the economy. The whole world panics and stock markets plunges 3% overnight. Raffles Medical’s stock price drops to below $1. At this time, would you panic and sell the stock also? If the fundamentals are still intact, doesn’t it make sense to buy more?

Patience

Last but not least, the investor must have patience in the market to be rewarded handsomely. Investing is not a “get-rich-quick” scheme. It will take years to build a solid portfolio and see significant gains from it. If you are watching Super Group Limited (SGX: S10) and you deem the price is a tad high now, you need patience for the price to come down below its intrinsic value to buy into the business. After you have bought a stock, you patience to hold on to the stock until the intrinsic value is reached. Trading in and out may prove futile. Rome wasn’t built in a day and certainly, businesses take time to grow.

Foolish Takeaway

Cultivating CDP may not be easy and it certainly cannot be honed through reading alone. One has to be invested in the market and feel the various emotions. Albert Einstein once said that the only source of knowledge is experience and I cannot agree more with him.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.