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How to Get Ahead in the Year of the Horse

Happy Lunar New Year to everyone! I hope the year of the Horse will be a productive and fruitful year for you, dear reader. As we celebrate the Chinese New Year, let’s look at some strategies we can employ to help us improve in our investing activities.

Being a Contrarian

Often in investing, we do not get outsized returns from following what everyone is investing in.

It’s more likely the case where our greatest opportunity would arise when there is great fear in the markets. As the Chinese word for crisis “危机“ (pronounced “way ji”) suggests, when there is danger or risk, (represented by the character “危“), there would be opportunities (represented by the character “机“).

Making a calculated bet is what an investor must constantly be thinking about doing.

For instance, prior to 2009, Genting Singapore (SGX: G13) was burning cash while trying to build up Resorts World Sentosa, which first opened its doors only at the start of 2010. But, an investor who was confident of the eventual success of the project and who made a calculated bet on the risks and rewards involved would have gained close to 400% since 2009.

Currently, the property sector within the Straits Times Index (SGX: ^STI) is being given a wide berth by the market given the poor performance of property-related counters in 2013. Consequently, that might just be an area where a contrarian investor can look for opportunities.

Leave Some for The Next Buyer

As investors, we will always try to maximize our returns. We hope to buy at the lowest point and sell at the highest point. However, if we take some notes out of one of the greatest investors of all time, Walter Schloss, it might be advantageous for us to learn to leave some profits behind and not pick only the highest prices to sell our investments.

This is because, if we see our investing career as a life-long pursuit, it is almost impossible for us to constantly catch the highest point that a stock might be trading at. Therefore, when the price of a company steadily moves toward our estimated value, it might be wiser for us to sell it off instead of hoping that it would move up further to pocket some small, extra gains.

Foolish Bottom Line

There are countless strategies available for investing in the stock market. Like martial arts, the main differentiator is not so much the style, but rather the skill of the practitioner. As long as we have conviction in our investing strategy and consistently apply it while constantly upgrading our skill sets, we should have many years of abundance ahead.

Once again, happy Lunar New Year!

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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 Stanley Lim doesn’t own shares in any companies mentioned.