Are You Controlled By Your Investments?

What is your relationship like with your investment? Are you controlling your investments or are you letting them control you? These may seem like weird questions to ask, but they are actually worth thinking about for every individual investor.

“I forgot the reason why I had bought them”

I often see many investors buy shares in a company without being sure of why they had wanted to make the purchase in the first place. In the worst possible scenario, the buying and selling of an investment is based on the price movement of a company’s stock.

This results in the investor holding onto those shares simply because he or she is unsure of what to do with them. Those shares are sometimes sold for a quick profit because the investor does not know the company well enough to have the confidence of holding them through a longer period of time.

A panic response

The worst part about investing in something we do not understand well or are not fully confident about is our response when some hairy situations arise with the investment.

For example, if we are an investor in Jardine Cycle & Carriage Limited (SGX: C07), we might have been worried when oil prices started to collapse in late 2014 and many developing nations, such as Indonesia, saw their currencies fall sharply against the U.S. dollar. As Jardine Cycle & Carriage reports in U.S. dollars but yet operates mainly in Indonesia, the currency situation would have been undesirable.

With all that going on, it’s easy to panic and sell shares of Jardine Cycle & Carriage when it fell from around S$44 apiece in mid-December to S$38 just a few days ago. But as it turns out, those worries were unfounded; the share price of Jardine Cycle & Carriage has since rebounded quickly and now sits above S$42.

A better way forward

The only way we can truly take control of our investments is to be confident in every investment that we buy into. And the way to achieve that is by understanding the companies well enough and play out different future scenarios for the firm.

We should think about the potential risks, threats, and opportunities the company might face in the future and how we want to react to them. In this way, when the company faces a new development, we would not be caught off guard and be controlled by the investment – instead, we’d be able to take charge and make a sound investing decision that is not based on fear.

With that, I’d like to close off with another question: Are the stocks you currently own the ones you will buy now if you did not own them in the first place? (Remember: We should not let our investments control us.)

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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 Stanley Lim does not own any company mentioned above.