The stock market is not the greatest motivator in the short term.
As we enter the final quarter of this year, Singapore’s Straits Times Index (SGX: ^STI) is essentially flat compared to where it was at the start of the year.
Meanwhile, the S&P 500 (INDEXSP: .INX) hit a 52-week high back in late July before gradually sliding down by around 7% from this peak.
Such moves, or lack thereof, can be discouraging.
When faced with a situation which is neither here nor there, you may start to get restless, and feel the need to change something to improve your investment performance.
Today, I am here to tell you to stay the course.
Above all, don’t get distracted.
6 principles to stay the course
1. Discipline in choosing the right stocks: A sideways market can be characterised by stocks which are neither expensive nor cheap.
Under the circumstances, restless investors may be tempted to take on higher risk or to lower their standards in search of better returns.
That would be the wrong move.
Don’t compromise business quality whether the market is up, down or going sideways.
2. Staying focused on what you need: Most of the time, stocks that suffer major declines receive the most attention; that shouldn’t be the case.
Buy what you want to own, and not necessarily what the market is offering you today.
3. Not a make or break moment: Restless investors feel the urge to get each investment decision right. Typically, they need to be validated by a positive stock movement after they buy.
Unfortunately, the stock market doesn’t work that way.
From our experience, we don’t have to be perfect in every decision we make.
4. Discipline in how you deploy your cash: No one knows how long this sideways market will last. No one also knows if the market will rally or experience a downturn in the short term.
So, take your time when it comes to investing.
You don’t have to invest all your money at one go. If your investing horizon is measured in years or decades, there will be plenty of time to add in the future.
5. Opportunity for the long term: When it comes choosing which stocks to buy, always buy with the intention of holding for the long term.
That still applies. Stay focused.
6. Understanding risk: Keep your eyes open and your feet grounded towards the potential risks in the businesses you own.
Get Smart: Stay the course
Staying disciplined in investing applies whether markets are up, down or going sideways.
So, whenever you feel the urge to do something different, you should remember not to compromise on the quality of the stocks you choose, nor be swayed by the market’s fluctuations.
You should buy what you need, not what the market offers. You should not expect to be right in every decision, nor invest all your money at once. You should hold your stocks for the long term, but also be aware of the risks involved.
Keep it simple and stay the course.
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: Chin Hui Leong does not own any of the companies mentioned.
