The Straits Times Index (SGX: STI) jumped last week on news of the Phase 2 reopening happening earlier than expected.
Truth be told, the local index had already been gaining long before yesterday. Since bottoming out in March, the STI has risen by over 20%.
For those who are invested, the gains over the last two months are a welcome sight.
But, if you missed out, you might be feeling a little, well, FOMO.
That fear of missing out…
The feeling of regret is not new.
Having emotions is what makes us human. Being able to care for others, and to love unconditionally. We won’t want it any other way.
However, when it comes to investing, some emotions can get the better of us.
For instance, the regret we feel for missing out on gains in the stock market can lead to impatience.
And impatience can be deadly if we do not keep it in check.
A (sad) tale of the third founder
Warren Buffett and Charlie Munger are the well-known founders of Berkshire Hathaway.
What is less known is that there was a third founder of the company: Rick Guerin.
At his peak, Guerin stood shoulder to shoulder with the likes of Buffett and Munger.
In fact, he was one of the select few who were named as “a Superinvestor” by Buffett.
Put another way, Guerin was not short on intellect.
But despite his ability, Guerin had one fatal flaw.
Money manager Mohnish Pabrai recounted a story on Guerin told to him by Buffett:
“And [Buffett] said, Charlie and I always knew that you would become incredibly
And he said, we were not in a hurry to get wealthy; we knew it would happen.
He said, Rick was just as smart as us, but he was in a HURRY.“
Impatience led Guerin to lever up on margin loans to invest.
Unfortunately, when the market took a sharp turn downwards in the early 1970s, Guerin was caught out by margin calls and needed to raise money to pay back his debt.
Sadly, the only way he could do it was by selling his Berkshire Hathaway shares to Buffett for a mere US$40 per share to pay back his debt.
How much are those Berkshire Hathaway shares worth today?
Just over US$270,000 each.
The price to pay for impatience
Let that sink in for a moment.
Guerin was smart.
His investing skills were comparable to Buffett’s.
Despite all of Guerin’s intellect, it was his impatience, or should we say FOMO, that led to the painful decision to let go of his Berkshire Hathaway shares far too early.
Ironically, it was Buffett, who was not in a hurry to get rich, that ended up far richer than Guerin today.
The lesson should be clear.
The question is not just about having the skills to invest.
It’s also about keeping our emotions from getting ahead of ourselves.
Impatience has no place in investing.
In the same way, FOMO should play no part when you invest.
Get Smart: Be part of a like-minded tribe
At The Smart Investor, we are building our own community of like-minded people who invest with the long term in mind.
Like Buffett, we are not in a hurry to get rich.
Instead, we believe that by choosing the best companies and holding them tenaciously.
Over time, we strongly believe that our results will prove to be well worth our effort.
When markets are rising, we are here to help you focus on the right things. And if markets decide to head south, we will be there to provide group support, like we did in March earlier this year.
That’s because we understand that investing is not just about picking stocks.
It’s also about keeping our emotions in check so that we can stay the course for the long term.
That is how we are going to build a strong, profitable portfolio that will weather any storm that may come in the years ahead.
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Disclaimer: Chin Hui Leong does not own any of the companies mentioned.