- When you collect, you do it slowly. you are not in a rush. you do it leisurely at your own pace. and the more bought at cheap price, the merrier.
- U judge how wu hua is the purchase based on your deduction of reasonable price range of that company
- Once you buy, u ignore the gyration in price. You resist with max effort the temptation to look at the price on your mobile app or website
- You block your mind from referencing the current price to last week’s or 3 mths ago; or anchor against recent low or 52 weeks high. You always refer to your own calculation of that reasonable price range and decide based on that
- You also block your mind from feeling elated or sad about the gyration in price after your purchase, because that will cloud your judgement and affect your decision making
- You further block your mind from imagining the windfall or the earnings that could come when you eventually sell at much higher price. You dont project, you dont calculate, you dont yearn.
Saturday, 12 March 2016
Collect the Good Stuff
Past 2 months were indeed a wild ride for investors. We witnessed a very volatile start for the year, continuing from last year’s fall stemming from oil rout and worries about China’s economy hard landing and the collapse in China A Shares.
But all of a sudden, the market sprang back to life past 3 weeks. And it came back strong, rising fast and furiously to end at 2828 yesterday, an almost 12% rise from the low point of 2528 few weeks ago.
It was at this time that investors, including myself, found that their investment philosophy, hypothesis about a company’s merit of investment, and their decision to buy, sell, or hold specific counters get tested to the max. The reasoning, conviction, and course of actions laid out in advance, that were supposed to guide you through the bear market, get thrown out of the window. Some people hide, some people sold all out, some people added more. Different mental make-up and attitude, different reactions.
I managed to pick up some counters like UPP, ST Engine, MGCCT and others at depressed price. Some of their prices rose together with the general market; some are still languishing at the low range; luckily none had big fall.
But besides picking up bargains during market low, I feel what is equally important is the way we organise and steel up our brain to handle the market fall well. Because this mental habit, once acquired and etched in our invest DNA permanently, follow us through the journey and can be activated once the next bear arrives, enabling us to make the right decisions, including buying during market despair. And we know market fall is as common as afternoon rainfall in Spore.
The thing is the more I invest, the more I feel that investment success is 70% or even 80% dependent on your temperament and mental state. Analysing company strength, weaknesses, reading the accounts, coming up with numbers, ratios are not difficult to pick up. You just need to study and practice. (Understanding the business model and the competitive strength it has over industry peers is hard, but that’s another issue).
Something I learnt from this episode, although nothing new, but now with a deeper level of appreciation, is the relevance of an investment mental approach of accumulation – COLLECT GOOD stuff at CHEAP price. Think people buying rushing to buy gold when its cheap; primary school students collecting rare stamps or magic cards.
In essence, it is to maintain a stoic, zen-liked mental state and just keep buying during market low. KEEP CALM AND KEEP BUYING THESE GOOD STUFF
Well, easy to say, damn difficult to do. But have to work on it. Start collecting on Monday!
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