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Quick Thought Of The Week: Outperformance

I was closely monitoring a couple of financial news channels this week. There are lots going on at the moment….

….. What with interest-rate hikes, the Sino-US trade war, the prospect of a no-deal Brexit, the US November mid-term elections and the death of the Saudi Arabian journalist that could push up oil prices.

And let’s not forget the rising dollar, the falling Indonesian rupiah and the cratering Indian rupee, and that the China stock market has lost 24% of its value since the start of the year.

It is little wonder that markets are volatile. So, I wanted to find out what is going through the minds of professional fund managers.

I was shocked.

Many money managers, it would seem, are happy to sit on their hands for now. They admit that markets are cheap, but they are worried that they could get even cheaper, if the sell-off should continue.

So, here’s the thing. They know that shares are a screaming buy. But they also have one eye on their upcoming year-end report card that could determine their fees and bonuses.

So, why take the risk of losing whatever gains that they have made so far this year? Why not just sit on what they have made already?

That is the problem with investing for the long term, whilst having to deliver short-term progress reports. But that is something that we, private investors, shouldn’t have to worry about.

We can forget about any short-term fluctuations in the values of our portfolios, and focus on the long-term rewards, instead. In my case, every dollar that I put into my portfolio today is expected to deliver rising income for decades to come.

So, the value of the portfolio is less important to me than the recurring income that it can generate. If the dividends that the portfolio produces should increase over time, then so too should the portfolio value, eventually.

In times of market volatility, it is important to focus on the things that matter. So, ignore near-term noise and focus on the long-term rewards, if you want to outperform.

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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.