Not everyone celebrates Thanksgiving.
However, we can all take a moment to be thankful for all we have received over the past year.
Case in point, both the US-based S&P 500 (INDEXSP: .INX) and the tech-heavy NASDAQ Composite (INDEXNASDAQ: .IXIC) indices reached record highs last Thursday night …
… leaving 2022’s market crash far behind.
Not to be outdone, Singapore’s Straits Times Index (SGX ^STI) or STI hit a 17-year high in September and is a stone’s throw away from an all-time high.
To be sure, no one knows where the market is headed next.
Yet, just as we commiserate when markets are down, let us celebrate our wins when markets are up.
The lessons learnt will be invaluable in the decades ahead.
So, let us count the ways …
An ode to staying invested
When markets are down, it’s easy to fall prey to the fearmongers who drum up negative headlines. On the flip side, when the stock market is rising, investors may be tempted to sell too early.
In both cases, investors may come to regret selling their stocks.
At the Smart Investor, we took a different tack: simply holding stocks for the long run.
Mind you, it wasn’t easy.
Early on, back in March 2020, Singapore’s STI dived by 30% from peak to trough in a matter of weeks. More recently, the tech-heavy NASDAQ was cut by a third as the threat of high interest rates ravaged the market.
But our portfolio walked the talk and held all the way through.
Need an example?
The Smart All Stars Portfolio bought shares of Microsoft (NASDAQ: MSFT) back in June 2020 at US$199.64. As of the market close last week, the stock has more than doubled, netting a gain of 122% — and that’s excluding dividends.
And what did it do to achieve this result?
The Smart All Stars Portfolio stayed true to our mission, holding the best stocks it can find for the long term. The end-result after 4.5 years is what you see today.
An ode to time in the market
When markets are down, it is tempting to sell with the hope of buying back at a cheaper price.
However, in my experience, this strategy seldom pays off.
The reality is, if fear drives you to sell during a market decline, it’s unlikely you’ll summon the courage to buy when prices drop even further.
Take Meta Platforms (NASDAQ: META).
When the Smart All Stars Portfolio bought shares twice between January 2022 and February 2022, the timing looked terrible at first.
In fact, shares fell sharply right after the purchases were made.
Did timing the purchases imperfectly matter in the end?
Not one bit.
Today, the two buys at US$323.25 and US$202.08 are up 93% and 209%, respectively.
Two important lessons stand out here:
Long-term quality trumps short-term timing: The quality of the business is far more important than timing your entry into the stock.
Tenacity in the face of adversity: If you want to achieve outperformance in investing, you must have the courage to hold through the thick and thin, even when the naysayers tell you to sell.
Of course, with the benefit of hindsight, critics will inevitably point out that you can buy shares at a cheaper price.
To this comment, I say …
One, I have never met an unhappy investor with a 200%-plus gain.
Two, perhaps, the only thing to be unhappy about is you didn’t buy more when Meta was trading at US$202.08.
But wait, to the second point, there’s good news.
Get Smart: An ode to investing in rising markets
At the Smart Investor, we are advocates of investing regularly.
That means, our portfolios have been adding to stocks even as the stock market rises.
Going back to the case of Meta, the Smart All Stars Portfolio added to its position in November 2023 at US$319.88 and again in April 2024 at US$452.31. As a whole, the entire position, including the 2022 buys, is up by over 100%.
But why is the portfolio adding stocks when there is the threat of an impending market downturn?
That’s because the portfolio is not following the drumbeat of the stock market. What we are watching instead is the growth of the underlying business. So long as Meta is performing, the Smart All Stars portfolio is happy to own the company.
Looking to create a lifelong income stream? Check out our report, ‘7 Singapore Blue-Chip Stocks That Can Pay You for Life.’ We uncover a powerful lineup of dividend-paying stocks with the reliability and growth potential you need in today’s market. Don’t miss out on these dependable picks. Download your copy now and start building a secure financial future!
Follow us on Facebook and Telegram for the latest investing news and analyses!
Disclosure: Chin Hui Leong owns shares of Meta Platforms and Microsoft.
