3 Simple Ways To Improve As An Investor

Credit: Simon Cunningham

Becoming a better investor need not be complicated. Here are three simple ways you can improve as an investor:

1. Justify your reasons for buying a stock

There are two important things to note down and keep for easy reference before you purchase any stock: The reasons behind the purchase and the factors that would make you sell it.

Recording these things have their advantages. Stock prices move unpredictably over the short-term, so even the best companies can see their prices decline sharply from time to time. When a stock you’ve bought declines, your conviction may easily falter if you can no longer recall the initial reasons behind the investment. That may result in you making poor decisions.

Writing down your reasons for buying a stock can also serve as a great learning tool. For instance, if an investment did not work out, you can check back at your reasons for buying and see where you could have analysed the situation better.

2. Be patient

The billionaire investor Warren Buffett once said: “You can’t produce a baby in one month by getting nine women pregnant.” Some things simply require patience – investing is one of those things.

A study by investment research firm DALBAR showed that in the 20 years ended 2003, US stocks had delivered an annual return of 12.98% whereas the average equity mutual fund investor in the US had achieved a return of just 3.51% per year.

DALBAR attributes the significant underperformance by investors to their tendency to jump in and out of their fund investments at the wrong times. In other words, investors simply weren’t patient enough with their funds.

3. Attend Annual General Meetings

An investor can easily update himself or herself about a company through its annual and quarterly reports that are found online. But there’s still value to be gleaned from attending a company’s Annual General Meeting (AGM). And in the case of Singapore, our country’s small size makes attending AGMs convenient.

An AGM is where you can hear first-hand, a company’s managers and directors sharing insights about the company’s historical financial performance, ongoing strategies, and future plans.

Being at an AGM also allows you to observe how a company’s leaders respond to questions from shareholders. Such information can help you form an opinion on whether you’d like to stay invested alongside a particular leadership team.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.