MENU

How Should Investors Prepare For 2016?

I’m a little late here, but Happy New Year everyone!

Most of us, around this particular time of the year, will try to reflect on what we did in 2015 and prepare for 2016. As investors, we probably will recall our investment decisions and reflect on the things that have gone wrong as well as the things that have gone right.

How 2015 looked like

For those of you who had invested in challenging industries such as oil and gas or property, 2015 likely had felt like an awful year.

As for those who managed to pick winners such as ComfortDelgro Corporation Ltd (SGX: C52), which was up nearly 17% in 2015, the year that just passed would be a great year to reflect on, with the hopes that the good performance will continue into 2016 and beyond.

For contrarian investors who were waiting for a potential downturn to invest, well, the market did not really offer opportunities in 2015 that were as compelling as those seen during the Great Financial Crisis of 2007-09. So, they might hope for better bargains in the year ahead after seeing the market nearly double from the financial crisis low that was reached on March 2009.

Thinking ahead: 2016

So, how should we prepare for 2016? For me, the answer is, really, nothing much different from 2015 or any other year for the matter.

In my opinion, we should just do whatever will help increase our chances of attaining investment success. And if we have been following a sound approach, we should just stick to it, even if it might not have delivered the result that we were expecting in 2015. After all, no approach can work all the time – what’s more important is that the approach will work over time.

This raises the question: What is a sound approach? There is no one single answer, but for me, a sound approach is to buy the right company at the right price.

To me, the right company is a company that is a leader/main player in an industry that provides sustainable products, whilst managed by a proven and shareholder-oriented management team.

An example of such a company, in my opinion, could be Singapore Telecommunications Limited (SGX: Z74).

SingTel provides a needed service – telecommunications – and is the largest player in Singapore. The company also holds stakes in many other telcos in other parts of Asia that are also among the top few in their respective markets.

Lastly, while SingTel’s share price has climbed by a pedestrian 21% in total over the past five years, it has managed to deliver growing dividends; to the latter point, SingTel’s ordinary dividend per share has stepped up from S$0.158 in 2010 to S$0.175 in 2014.

Meanwhile, the right price is a price that is ideally lower or at most fair to the intrinsic value (a value that knowledgeable investors will pay) of the company.

Sticking with SingTel, is the company selling below it intrinsic value at the moment? I’ve tried to answer this question recently and you can see it here. But, bear in mind that the question will ultimately require individual judgement as every investor will arrive at a different conclusion.

Key takeaways

So what will I personally do in the beginning of 2016?

I will firstly reflect on the wrong decisions made in 2015, learn, and move on.

Secondly, I will set a plan to execute on the idea of buying the right company at the right price.

Thirdly, I will aim to have ample patience and discipline to execute my plan.

Lastly, I will be happy and wish for a wonderful 2016!

For more insights on investing and to keep up to date on the latest financial and stock market news, sign up now for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock SingaporeIt will teach you how you can grow your wealth in the years ahead.

Also, like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.