3 Important Words You Should Remember When Investing

Some share market participants like to look at charts; some like to talk about alpha, beta, and how they hedge their delta (whatever that actually means?).

Meanwhile, there are others like us here at The Motley Fool Singapore who like to simply just study a company and its businesses and try our best to figure out how it might be doing years into the future.

Truth be told, in the share market, there is no one sure way of making money and I’m not even trying to say that what I – and my colleagues – try to do here is the only way; this is simply how I would view investing.

Keeping it simple

If you’ve had a chance to speak to investment professionals, you might find that there are some who love to use financial jargon – perhaps that’s the way they would like to convey how knowledgeable they are.

They might teach you how to calculate the WACC (weighted average cost of capital) of the companies you’re invested in, or help you track the R-square of the shares you own in relation to a broad share market barometer like the Straits Times Index (SGX: ^STI) here in Singapore.

If those terms confuse you, you’re not alone. After almost a decade in this industry, I still can’t make head or tail of such jargon. However, what I do know is that the companies in my portfolio had been doing well, is doing well and should continue to perform well operationally for many more years to come. That should be the main thing that matters.

Often, we assume the more complicated something is, the more accurate it should be. How wrong can that be when it comes to investing as the more complicated the process, the more errors it can create!

In investing, a good mantra to remember, in my opinion, is this: “Keep it simple.” We do not need to know everything about every company; we just need to know what we are good at and stick to it.

For example, Keppel Corp (SGX: BN4) might be an overly complex company for some with its disparate business segments. Its businesses deal with offshore & marine (it builds vessels and oil rigs), infrastructure (it has logistics operations, warehouses, and even rents out data centre capacity amongst other activities), and real estate (it develops and owns many different types of properties). If you have trouble understanding Keppel Corp, there’s no need to force yourself to understand it even if everyone around you is constantly harping about the company. There are always plenty of other fishes in the ocean.

Foolish Summary

When learning about investing, you do not need to be thrown off when you come across something you cannot understand or had happened to talk to someone who was throwing out jargon after jargon. All you need to do is to remember this three simple words: “Keep it simple”. Simple is often all you need in investing.

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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.