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1 Comforting Thought for the Current Stock Market Rout

The past four months have been rough for investors in Singapore.

From a peak of 3,550 points reached in April, the Straits Times Index (SGX: ^STI) has proceeded to fall by around 17%. This had been due to the declines experienced by Singapore’s largest companies, from our trio of banking giants to the oil & gas outfits.

If you’re an investor in Singapore’s stock market, it is certainly not fun to see your level of wealth – paper or not – get slashed in a matter of months. So, here’s one comforting thought to help troubled investors tide over the difficult times as the market falls.

Don’t be too fast to sell

A friend of mine, who’s a savvy investor, shared this good analogy with me just this morning:

“Imagine that you have a property that is valued at $350,000. If a bunch of jokers knocked on your door and offered $150,000 for your home, would you sell it? You’ll probably chase them away with your broom.”

This is a nice way of framing what is happening to the stock market recently. At the moment, there is a good chance that there are a lot of lowball offers – in the form of lower share prices – being made for the shares that you own.

If you are confident in the value of the businesses that underlie the stocks you hold, then you may want to be steadfast in your belief in your investments despite the big rush for the exit door happening in the market now.

This may not apply for all companies of course, but if you have chosen good companies from the start, now’s a good time to hold onto those shares tenaciously or even consider adding to your positions.

A Fool’s take

“Price is what you pay, value is what you get”

– Warren Buffett

I find that most people will agree with the quote from Buffett above. It sounds nice, but it will be even better if we put it into practice.

It’s in times like these that our belief in Buffett’s statement above will be put to the test. But it’s crucial to remember that a falling share price may not mean that the value of the business has diminished. To be a Foolish investor, looking for value in the face of falling share prices is what we would want to focus on.

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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.