Get Smart: How To Achieve Success in Investing – The Smart Investor

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Have you ever been on a hike up Bukit Timah Hill? Depending on the path you take, for many, it can be a difficult journey up. 
Aside from the frequent steps that you need to climb, there are also uneven areas with treacherous roots and vines that threaten to trip you up.
But what keeps you going is the “reward” you’ll get when you reach the summit — the spectacular view that awaits you.
It struck me that investing is very much the same.
The journey will be far from smooth. 
Oftentimes, you’ll encounter stumbles and obstacles that will test your patience and resolve.
Against the backdrop of falling stock markets in the US and Hong Kong due to a sharp hike in interest rates and fears of an impending recession, investors have been feeling increasingly jaded and jittery.
But soldier on we must, because the alternative of leaving your cash to erode in the bank is much more painful.
As investors, we all feel the pain of falling share prices.
The purpose of investing is to grow your money, rather than seeing it shrivel like a dead leaf.
Truth be told, does the decline in share prices really portend a “shrivelling” of your hard-earned money?
Or are these merely bumps on the road that you need to endure to eventually reach the proverbial pinnacle of your investment journey?
The conclusion is this — share prices will fluctuate, sometimes wildly, even on normal days.
With bearish sentiment and a poor economic outlook, it’s understandable for volatility to be even more pronounced than the norm.
The key is to focus on the health of the underlying businesses within your investment portfolio.
If these businesses are chugging along and have characteristics that make them great long-term picks, then you need not fret.
Your money will still do fine over the long run, but volatility is a trait of the stock market that you need to come to terms with.
Many investors deploy their cash into the market with the expectation that it will grow but forget that along the way, they will experience significant volatility.
This erroneous expectation causes many to sell out in panic when they cannot take the pain of seeing losses within their portfolio, even if these losses may be temporary.
There’s also merit in eyeing the destination rather than sitting through the process if your heart cannot tolerate this volatility.
Take the example of financial technology company iFAST Corporation Limited (SGX: AIY).
If you had bought shares of the company at the start of 2020 at S$1.06, you’d be staring at a more than four-fold capital gain as shares closed at S$4.69 recently. 
It’s a different story, however, if you had tracked iFAST’s share price over this period.
The company’s stock hit its highest point at S$9.78 back in September last year and has fallen 52% from that peak to its current level.
An investor who hopped on this unexpected roller-coaster ride would have felt disappointed that iFAST had lost half its value in less than a year.
But if you had shut your computer and gone on a holiday for the last two and a half years, you’d arrive back ecstatic to learn that your investment had turned S$1,000 into more than S$4,000, dividends excluded.
This simple example serves to illustrate the folly of following a company’s share price too closely, as it can serve only to disappoint rather than elicit joy.
As a shareholder, you should feel mighty pleased instead — iFAST grew its net revenue from S$65.2 million in 2019 to S$113.2 million in 2021.
Net profit shot up more than three-fold S$9.5 million to S$30.6 million over the same period.
Herein lies the truth about investing — it can be extremely rewarding but you need to handle the bumps on the rocky road to arrive at the destination that you desire.
None of this is easy.
You need to adjust your expectations if you had believed so.
But if you are disciplined, patient and can control your emotions when volatility hits, you’ll eventually enjoy investment success.
And it always feels so much sweeter after you’ve gone through a rocky patch.
This could be the fastest way to jump from a “newbie” investor to a seasoned pro. Our beginner’s guide shows everything you need to know to buy your first stock and beyond. Click here to download it for free today.
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Disclaimer: Royston Yang owns shares of iFAST Corporation Limited.
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