Making Money The Easy Way

Did you know that making Spaghetti Bolognese is one of the top 30 skills that students learn at a British university?

That’s according to a survey of UK college goers. It even ranks higher than setting up the internet and, believe it or not, knowing not eating mould.

My spaghetti-making skill was acquired during my time at university too.

I can now make it blindfolded. And just the other week, I had my heart set on making a batch of the popular Italian ragu.

A disappointment

I was really looking forward to it. But as luck would have it, my local supermarket ran out of mince beef.

It was disappointing. But it was hardly the end of the world. The Bolognese can always wait.

Something similar can happen in the stock market.

Do you remember the unfortunate software glitch that brought trading to an abrupt halt on the Singapore market? People could neither buy nor sell shares.

These things happen. They shouldn’t do. But they can from time to time. So we need to learn to cope.

Hardly a disaster

For the Exchange, it probably meant a day’s loss of revenue. However, deals that would have been transacted on the fateful day would probably have been executed the next day. That is hardly a disaster for Singapore Exchange (SGX: S68).

Traders who buy and sell shares for a living might have had good reasons to be annoyed, though. It could mean a loss of income for the day.

But long-term investors should not be overly concerned by gremlins in the works, when they happen.

Most of us understand that the more complex and sophisticated a system becomes, the greater is the potential for failure. Misfortune, where computers are concerned, is always just around the corner.

Long-term approach

Warren Buffett once said: “I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.

We should do the same.

So, when markets are shut, for whatever reason, we shouldn’t get too worked up about it. We can always tune in later.

But it can be disheartening if you have your heart set on buying some shares. However, time is on our side, if we are looking to buy shares in superior companies for the long haul.

Patience is a virtue

We have to learn to be patient. Peter Lynch once said: “Even if you missed Wal-Mart in the first five years it was still a good stock to own in the next five years.”

If we miss the opportunity to buy a stock today, there is always tomorrow.

So waiting a bit longer to buy a stock is unlikely to make that much of a difference. We should neither look back nor regret a missed opportunity.

When we invest, we should consider carefully what a business could be worth many years from now.

Think in decades

We should not be too obsessed by quarterly results, though some people are. We should not be too fixated at next year’s earnings. We should not be paranoid about price momentum or trading volumes. We should just be asking how much the business could be worth in a decades’ time.

When we buy a stock we should be looking to buy good businesses at fair prices. That means building a decent margin of safety when we make our purchases.

The margin of safety is unlikely to evaporate as a result of a delay in trading for a day or even a couple of days. If it has, then we probably need to get back to the drawing board.

Investing should always be an unemotional pursuit. It should be about looking at the cold hard numbers. It should not be about sentiments.

If you cannot control your emotions, then chances are you cannot control your investments. So keep those emotions – bit they fear or greed – in check at all times.

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.

Like us on Facebook to keep up to date with our latest news and 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 Director David Kuo doesn’t own shares in any companies mentioned. Stock Advisor Gold has recommended Singapore Exchange.