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Will Oil Prices Stay Low Forever And How We Can Solve That Mystery?

So the dream of a rebound in oil prices has been shattered – at least temporarily. A meeting between Saudi Arabia and Iran in Algiers this week has failed to produce any meaningful agreement between the two countries to cut their production of oil. Oil prices fell by 3% on the news.

Should investors give up on the hopes of seeing higher oil prices? Although many companies within the oil & gas industry in Singapore – including Sembcorp Marine Ltd (SGX: S51) – think the industry is in for protracted winter, we have seen from history that things can change rapidly and unexpectedly.

In mid-2014, when oil prices were still hovering around the US$100 per barrel mark, there were hardly any predictions that we would be in such a position today, with oil at less than US$50 per barrel. The truth is that we can never be certain about where oil prices will be in the future. Not even members of OPEC (Organisation of the Petroleum Exporting Countries) know.

Thus, as investors, we need to be aware of our limitations. Every investment we make are based on certain assumptions. It is important that we understand what these assumptions are and why we make them.

One way for us to keep track of our assumptions and learn to be better investors is to keep an investing journal. My colleague Chin Hui Leong has shared the advantages of keeping an investing journal in the past, as have another of my fellow Fools, David Kuo.

Most of us do not have photographic memories. So if we are able to write down some of our assumptions and reasons for investing in a particular company either before or shortly after we invest, we would be able to check back in the future to see if our assumptions and reasons still stand.

In this way, we are forced to be accountable to ourselves. It also allows us to learn from our past – we can see where our assumptions are wrong or unreasonable, and improve our investment analysis from there.

For me, I keep a digital file on every company that I come across.  As I find out more about them over time, I would add information to my dossier. In this way, I would be able to track my findings and thoughts about the companies with each passing year.

And if you are honest with yourself, you will be able to find out the many mistakes you have made over the years too. But, there is no need be ashamed of our mistakes. Instead, we should learn from them. As Confucius once said, “Study the past, if you would define the future.”

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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 writer Stanley Lim doesn’t own shares in any companies mentioned.