Time waits for no one.
But as we grow up and age, we may long for the days that have passed.
I sometimes reminisce of my days as a teenager.
And as I observe the jumping share prices on my mobile phone, I am reminded of my days in University attending the business school’s orientation camp.
Ready, set, pull!
Orientation is one of the first highlights for a university freshman.
The networking, mingling and forging of friendships is priceless..
It was during one of these events that I witnessed a classic game being played being two opposing teams: tug of war.
Each team will round up their strongest and toughest members (usually the buff men).
They will then latch on to a thick rope, with five on each side, and start to heave and pull.
Once a team crosses a certain threshold, it will be declared the winner.
It was a fun and rowdy game with both teams yelling and cheering their members on.
Interestingly, stock markets behave in the same way..
The tug of war in the markets
Every day, groups of buyers and sellers play tug of war with one another, battling it out to see who can gain the most advantage.
Like the real game, sometimes participants grow weary and loosen their grip.
The other team then pounces on this chance to claim victory.
If the buyers are victorious, the flood of money will push share prices upwards.
But if the sellers gain ground, share prices will tumble in response.
This tug of war plays out every day based on the morale and sentiment of all the participants.
And it can be thoroughly fascinating to watch.
Some investors are transfixed to their screens as they watch the battle of wills play out.
But what does all this activity mean?
Do you, as an investor, benefit from this?
My answer is a firm no.
The crux of the matter
Your goal, as a Smart Investor, is to own great companies over the long-term.
The constant struggles between buyers and sellers should not concern you except to provide a smidgen of entertainment.
Instead, what should concern you is how the business behind the ticker.
As famous investing guru Warren Buffett once quipped: “If the business does well, the stock price will follow.”
In the short term, stock prices will rise and fall.
But in the long term, the stock price will reflect what the business is worth.
And that is where we want to be at, thinking long term, and buying stocks that can earn us a good return for our money invested.
As long as you continue to own solid businesses that churn out profits and cash flow, you have nothing to fret about.
As investors, we invest for a better and brighter financial future. It shouldn’t come at a cost of our current state of mind.
At The Smart Investor, we invest in companies that allow us to sleep soundly at night, come what may.
So, enjoy the daily tug of war, but don’t let it affect you emotionally.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
