How to Focus on the Best Companies during a Market Downturn

It might sound like an understatement to say that there is a correction in the stock market right now. 

On Monday, the Straits Times Index (SGX: ^STI) closed at around 20% below its peak this year, marking a near-entrance into bear market territory. Yesterday, the stock market recovered slightly, but still offered little reprieve as the index ended at around 19% below its aforementioned peak. 

Amidst the sea of red, a good friend of mine told me about his situation: There were “many opportunities, but not enough money.” While this sounds like a problem, I would also argue that it is a good problem to have.   

Advice from Steve Jobs 

I have always liked this particular quote from the late Steve Jobs, the co-founder and ex-Chief Executive Officer of Apple Inc. In this case, Jobs was speaking about how to focus on key areas of innovation:     

“People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things I have done. Innovation is saying no to 1,000 things”

While Jobs was speaking about innovation in general, the same spirit of his tenacity to focus on only the best ideas could be used for stock picking as well. 

With limited capital, we are forced to pick only the best companies from the more than 700 names listed within Singapore’s stock market. This may mean focusing your research on companies which have shown resilience during downturns or simply companies that have increased dividends under similar economic circumstances.   

A Fool’s take 

As Foolish investors, we have the choice over where we spend our time in researching companies and which companies we buy. The little advice from Jobs could go a long way in helping us focus our time on the few most deserving stocks.

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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 owns shares in Apple Inc