The Motley Fool

Quick Thought Of The Week: Reckless

As investors, there will be moments when we might doubt whether we have bought the right share or done the right thing….

…. Should I have exited, when the going was good? Should I have bought this share that has gone up rather than that stock that has gone down?

It is only natural to have doubts, especially when markets are working against us. Just look at what has happened in Asian markets.

It wasn’t that long ago when investors – both local and overseas – couldn’t get out of Asian emerging markets fast enough. The withdrawal of funds from some developing nations was so frantic that their currencies dropped, precipitously.

Indonesia’s central bank even had to increase its benchmark interest rates five times in four months to stem the rout in the rupiah.

But at the drop of a hat, money has returned to those economies again. That in turn is driving their stock markets higher. Fear of missing out has, amusingly, replaced the fear of losing money.

Swing low

The ebb and flow of money from markets is not unusual. It just seems more prevalent now because in 2017 the US market swung by more than 1% on just eight separate trading days. In 2018 it moved by at least 1% on 64 occasions.

Point is, share prices rise when there are more buyers than sellers. They move in the other direction when there are more sellers than buyers. But they don’t tell us anything about the companies we invest in.

The market is there as a reference point to see if anybody is offering to do anything reckless. So, investing is really a study of the recklessness of human nature.

The fact that people will do something stupid is predictable. It’s just a question of when.

And the sillier the market’s behaviour, the greater the opportunity for the focussed investor. We won’t go too far wrong if we just think of the stock market as a relocation centre where money is moved from the ignorant to the informed. So, stay informed.

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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.