The Best Investment Decision You’ll Make

When it comes to investing, the most common questions I get from my friends are:

  1. What share should I buy?
  2. When or what price should I buy it?
  3. How much to buy?

The missing question, though, is the decision we might make the most often throughout our investing lives. And, that is:

“Should I continue to hold it?”

Technically, we could say that the shares in our portfolio are on sale at the stock market almost everyday.

As long as there is a share price for our companies reflected in the stock market, there’s an available offer at a certain price. Arguably, it’s nearly everyday that we have to make a decision on what to do with our shares.

For the short term trader, it could be an agonizing task to decide minute by minute on what to do. But for the Foolish long term investor, it’s much easier.

Doing nothing is a decision

That’s because the best decision, and arguably the one which we – the Foolish investors – will be making the most is to “do nothing”.

It’s also not tough to accomplish – you may do so by focusing on the potential long term outcomes of your companies, and worry less about where their share prices are each day.

After all, the best returns in the share market often take years to manifest and are not dependent on the minute by minute decisions we make. Or, as investing maestro Peter Lynch puts it (emphasis mine):

“People want instant gratification, but that’s a guaranteed way to lose money in stock investing. From one year to the next, the stock market is a coin flip: it can go up or down. The real money in stocks is made in the third, fourth and fifth year of your investment, because you are participating in the company’s earnings, which grow over time.”

And to Lynch’s point, the decision to “do nothing” over five years might just bring you wonderful results.

Long term patience has seen the share price for companies like tourism asset manager Straco Corporation Ltd (SGX: S85) and diamond systems manufacturer Sarine Technologies Ltd (SGX: U77) rising by 469% and 897% respectively in the five years ended 9 February 2015.

This compares with the 22% gain made in the same period by the SPDR STI ETF (SGX: ES3), a proxy to the market indicator the Straits Times Index (SGX: ^STI).

Foolish summary

The best investment decision you’ll make might be to buy great companies to hold for the long-term.

Of course, this is not for every company – but it’s worth pointing out that this long term sentiment is shared by some of the best investors like Peter Lynch. As such, it may be fitting to end the article with a quote from another great investor – Warren Buffett’s illustrious side-kick, Charlie Munger – who mused:

I couldn’t have summarised it any better.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.