How To Be Sure-footed In The Year Of The Goat

Kung Xi Fa Cai, everyone!

If you were to ask anyone what the Lunar New Year means to him or her, you are likely to get some very different answers.

For some, it could signify a new beginning. It is after all the Spring Festival.

For others it could be the food – plenty of it. Whether it is Tang Yuan, Bakwa or those oh-so-delicious Dumplings, food is undoubtedly a key part of every Lunar New Year celebration.

For others, though, it could be a chance for families to reunite, especially those who have relatives that spend most of the year working far away from home. And for children, the New Year invariably means Ang Pao to help kick start their savings habit.

For me, the New Year is a time of reflection. It is always good to Take Stock (no pun intended).

In particular, the extended holiday break gives me a good opportunity to look over my portfolio to assess how it has fared.

One stock that has a special place in my portfolio is CapitaRetail China Trust (SGX: AU8U). It was my first ever Singapore Real Estate Investment Trust. I bought at S$1.70 around two years ago.

At first sight the REIT does not appear to have been the best of investments, given that the shares are worth S$1.66 today.

But we should never judge a stock by price alone.

Over the last couple of years, after a fully taken-up rights issues and reinvested dividends, the adjusted buy price is not S$1.70 but S$1.51, instead.

So rather than a small capital loss, the investment has delivered a not-too-shabby annual total return of 5.7%. That certainly beats leaving money in a savings account. Or as Warren Buffett once said: “Be content with moderate gains”.

There are a couple of things or three to take away from this.

Firstly, it is that reinvesting dividends should never be underestimated. Compounding is unquestionably one of the most powerful tools that we, investors, have at our disposal.

The second is to stay focussed on the big picture.

Investing should never be about making a quick buck. When we invest in a company, we need to understand why we are buying it. In my case, it is about the long-term rebalancing of China’s economy and how to capitalise from it. The process could take years.

The stock has been volatile, though. At its lowest point, it had lost almost a quarter if its value, as markets fretted over the slightest hint of bad news from China. But the key to handling volatility is to embrace it rather than to be intimidated by it.

Someone asked me the other day whether I thought the stock market would be volatile in the Year of the Goat. I said I do hope so.

You see, volatile markets give us the opportunity to buy stocks at prices that we would never have otherwise been able to. The key, however, is to be as sure-footed as the Goat and to know exactly what we are buying. As Buffett once said, “Price is what you pay, value is what you get”.

From all of us here at Motley Fool Singapore, we wish you a very prosperous Year of the Goat.

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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 Director David Kuo own shares in CapitaRetail China Trust.