1 Important Thing to Remember In today’s Market

Overnight, the American share market added to its losses as the S&P 500, a broad market index, slid by 1.65% – all told, the S&P has lost 7.1% of its value from its recent high. In Singapore, the Straits Times Index (SGX: ^STI) has slid by more than 5% from its high of 3,374 points this year which was reached in end-July.

No one knows if prices will continue falling, or if a rebound is coming anytime now. But given recent falling prices, it can be disheartening to see your shares lose value so quickly after you’ve bought them. Indeed, some of the STI’s constituents have suffered even bigger drops since the end of July – shares like Sembcorp Marine Ltd (SGX: S51) and Jardine Cycle & Carriage Limited (SGX: C07) have declined by 12.1% and 14.2% respectively.

In times like these, it pays to remember one thing: Great long-term winners can look like the worst losers in the short-term.

One of my favourite stories of how investors should keep a long-term focus comes from an American television show called The View. Back in 2 July 1998, The Motley Fool’s co-founders, David and Tom Gardner, were invited to give a stock pick for the show’s host and they happily obliged.

Six weeks later, they were invited back on The View and were roundly booed by the live audience there. Turns out, their pick had lost 33% of its value. 33%… in six weeks. According to David’s friend, no guest had ever been booed on The View. But, the stock did lose a third of its value in six weeks and the Gardners had to roll with the punches, even though they still believed in the business at that time and urged the host to hold on for the long-term.

That stock is the global coffee-chain powerhouse Starbucks. It was worth US$7.08 per share on 2 July 1998; it closed at US$72.19 yesterday night. What looked a complete loser over the short-term, has turned out to be an incredible winner over the long-term.

Back then, Starbucks had less than 2,000 outlets and was a domestic growth story in the U.S., with hardly any presence internationally. But, it was already busy transforming the way consumers drank coffee and experienced a coffee house. Today, the company has 20,863 outlets scattered across the globe and is still leaving its mark on the way we appreciate coffee.

If you believe in a company’s business and its management and think that they can thrive in the years and decades ahead, then forget about what its share price might do over the next few months. Look ahead and envision where its business might be – that’s what’s important.

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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 writer Chong Ser Jing owns shares in Starbucks.