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A Clue To Successful Investing

Someone asked me, perhaps a little cheekily, the other day if I had any hobbies, other than the stock market. I was stumped.

I used to collect stamps. But I gave that up a long time ago because I felt that philately would get me nowhere.

So, for the last couple of decades or so, most my time – both spare and otherwise – has revolved around the stock market.

Even when I am not explicitly looking at shares, my poor subconscious – which I have absolutely no control over – is constantly evaluating the things around me from an investing perspective.

Uncontrollable number crunching

It can be one of the unintended consequences of being an analyst – uncontrollable number-crunching. I just can’t help myself.

But my apparent lack of hobbies got me thinking. Could it really be possible that all my favourite hobbies of the past have been consigned to the dustbin of time?

Gone fishing

Then it came to me in a flash. Of course I have a pastime. Buffett has bridge. That’s a pastime. Peter Lynch has fishing. That is another pastime. I have cryptic crosswords.

Cryptic crossword clues are never quite as difficult as they might seem. There is always a main clue. But there can also be a lot of fluff that can lead you down the garden path, if you are not careful.

Investing is a lot like that too.

News and noise

Every day, the media is full of news, commentaries and opinions that can distract us from the things that matter. Our aim, though, should always be to look for good stocks that we can buy at a good price, and hold them for as long as they remain good companies.

But our views about our investments and the market can be challenged and tested, if we are not careful, by the opinions of others.

Consequently, it is crucial to separate news from noise – to separate chatter from the things that matter.

News is fact. Noise, on the other hand is what people think. Confusing the two is an easy way to lose money by reacting impulsively to the opinions of others.

Here are some facts that are worth keeping in our back pockets.

  • Since 1987, the Straits Times Index (SGX: ^STI) has been higher 66% of the time at the end of every two-year period.
  • It has been higher 74% of the time at the end of every 10-year period.
  • It has been higher 100% of the time at the end of every 20-year period.

Confusing times

Consider the recent confusion – though some might say debacle – over US interest rates. Exactly why stock markets reacted the way they did to the lack of an interest-rate hike is beyond me.

When the US finally gets around to hiking rate, it means that the global economy is on a path to recovery. By then, though, stocks are likely to be more expensive than they are today.

So take advantage of market lull now. Look forward to what your investments could be worth two, five and ten years from now. With the odds of success so overwhelmingly in our favour, it would be a shame to be distracted by market noise.

But as Peter Lynch once said: “People invariably feel better after the market gains 600 points and stocks are overvalued and worse after it drops 600 points and the bargains abound.

Which camp do you belong to?

A version of this article first appeared in Take Stock Singapore. Click here now for your FREE subscription to Take Stock – Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo, Take Stock – Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.

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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 doesn’t own shares in any companies mentioned.