Everyone has their own investment style, and there are many different methods of investing.
However, what has been proven in practice is how your wealth can multiply many times over by simply holding on to great companies over years, or even decades.
His investments in companies such as Coca-Cola Co (NYSE: KO) and Wells Fargo (NYSE: WFC) have grown significantly over the years in value.
Such an exemplary track record is no doubt stunning, and the good news is that it’s not out of the reach for retail investors such as you and me.
Complaining rather than compounding
A common complaint I hear from some investors is how they miss out on companies that turn out to be multi-baggers.
A multi-bagger is defined as a stock that goes on to double, triple or even quadruple your initial investment.
I’ve had the great fortune to score a few multi-baggers in my investing life, the most recent one being iFAST Corporation Limited (SGX: AIY), which I first purchased in 2017.
I can also count VICOM Limited (SGX: WJP), which I first purchased in 2012, as another multi-bagger after eight years of owning it.
Yet, for some investors, holding a stock that doubles or more remains elusive.
Some may grumble that they never encounter stocks that manage to churn out such great returns.
The reason is simple.
A matter of temperament
You’d be surprised to learn that there are some investors who do many of the same things, yet experience very different results.
These investors may go through the same analysis and discussion on the merits and risks, and identify the same kinds of traits that make certain businesses great to own.
Going by this logic, you would assume that they should be enjoying the same results.
But the problem, I realise, is not in the identification of potential multi-baggers.
It’s that many investors simply do not hold on to the stock long enough to enjoy the growth in the underlying business.
This seemingly small difference in behaviour has been the differentiating factor that separates those who enjoy multi-baggers, versus those who do not.
Rapid re-deployment of capital
These impatient investors tend to sell out of a great company when they witness a 20% or 30% gain.
Somehow afraid that these gains will vaporise the next day, they are eager to “lock in their profits”.
The theory is that by rapidly re-deploying your capital to several such “winners”, you can rollover your money and grow it quickly.
The problem with that method, though, is that one would miss out if the company continues to grow and the stock price multiplies many times over.
Buying and selling in rapid succession to enjoy a series of 30%-gains is another challenge in itself.
Your results are dependent on your actions
So, dear investor, remember this one piece of advice today.
Having the patience and tenacity to hold on to a growing company over years will allow you to reap the rewards from the seeds of success sown years ago.
Take action today and let your investment portfolio compound its way to a secure retirement for you.
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Disclaimer: Royston Yang owns shares in iFAST Corporation Limited and VICOM Limited.