If there’s only one thing you will do in terms of stock market investing for 2015, make it this: Observation. Marcus Aurelius once said, “Nothing has such power to broaden the mind as the ability to investigate systematically and truly all that comes under thy observation in life.” By observing what is going on in the stock market, we will realise a lot of things. For one, it is that the market always does its thing. As noted by my colleague, Ser Jing, it is common for Singapore’s market barometer, the Straits Times Index (SGX: ^STI), to decline by 20% or more in any given…
If there’s only one thing you will do in terms of stock market investing for 2015, make it this: Observation.
Marcus Aurelius once said, “Nothing has such power to broaden the mind as the ability to investigate systematically and truly all that comes under thy observation in life.”
By observing what is going on in the stock market, we will realise a lot of things. For one, it is that the market always does its thing.
“I took historical data of the STI from Yahoo Finance and looked at the percentage declines in each calendar year from the index’s annual-peak to its subsequent-trough. Turns out, in 25 full calendar-years [from the start of 1988 to the end of 2012], the STI has declined from its annual-peak to its subsequent-trough by more than 20% in eight separate years. That’s almost one-third of the time and yet market participants anecdotally find out that their stomachs start churning even at 10% pullbacks!”
When we let the market do its thing and understand what’s going on, we will not fight it but will be able to embrace it. And embrace it we should – despite 20%-declines being common for the market benchmark, it has more than tripled since starting 1988 at around 830 points. Huge declines in the Straits Times Index usually portends opportunities for long-term investors to buy at a low valuation. And lest you forget, the longer your holding period for stocks, the higher your chances of turning in a profit.
Another reason to be observant is so that you can generate investment ideas.
Beginners who are new to investing are usually in a dilemma on which stocks they should buy into to kick-start their investing journey with.
To find out which stocks to start looking into, think about yourself. Where are your interests? Where do you work? How do you travel? What products do you use frequently? Where do you shop? Which restaurants do you patronise?
One of the favourite pastimes of Singaporeans is shopping. And there are no shortage of shopping mall owners in Singapore’s stock market. Two that come to mind include CapitaMall Trust (SGX: C38U) and Frasers Centrepoint Trust (SGX: J69U).
CapitaMall Trust was the first real estate investment trust listed in Singapore and has malls such as Plaza Singapura, JCube, and Junction 8 in its portfolio. Meanwhile, Frasers Centrepoint owns shopping malls like Changi City Point, Northpoint, and Causeway Point.
While at the malls, you may find other famous listed companies such as bookstore owner, Popular Holdings Ltd (SGX: P29), IT products purveyor, Challenger Technologies Limited (SGX: 573) and supermarket retailer, Sheng Siong Group Ltd (SGX: OV8). You might even grab a bite at the many bakeries and restaurants owned by BreadTalk Group Limited (SGX: 5DA), such as Din Tai Fung and Carls Junior.
Once we have zoned in on a company after keen observation, we then have to understand how the company makes money, look at the financial statements of the firm, understand the people behind the company and what they have done for the company over the years, and look at the valuation of the business.
Let me leave you with an amusing quote on observation by Brian P. Cleary:
“Any cupcake consumed before 9AM is, technically, a muffin.”
Happy investing in 2015!
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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.