I bought my first stock when I was 29.
If you started earlier than me, let me congratulate you first.
You’ll find out why before the end of this article.
I’ve been investing for 21 years now.
Think of this as a letter to my younger self — the lessons I wish someone had told me when I was starting out.
Whether you are 20 or 60, these lessons apply.
But if you are closer to 20, you have an edge that no amount of money can buy.
More on that later.
Lesson 1: Stock prices can move for no reason at all
Buying your first stock is one of the most exciting things in the world.
Your heart races.
You’re anxious to know whether you made the right decision.
One of my first experiences was watching my stock decline by 10 per cent within a month of buying it.
I was frantic. I searched everywhere for a reason why the stock had fallen.
But then, out of the blue, the stock jumped by 10 per cent, erasing all my losses in an instant.
Curiosity got the better of me.
What had caused the stock to jump?
After digging around, I found the only explanation I could come up with: the CEO of the company had rung the opening bell for the NASDAQ that morning.
That’s it. That was the reason.
Now, I was very new to investing back then.
But I knew enough to realise that you can’t expect your CEO to ring the opening bell every day.
Stocks can jump 10 per cent or drop 10 per cent for no good reason at all.
In the short term, the stock price can go anywhere, often in directions you don’t expect.
But in the long term, if you pick the right stock and the business improves, you can expect the stock price to follow.
More on that later.
Lesson 2: Why I moved from index funds to stocks
Here’s a surprise: I didn’t start with individual stocks.
I actually started investing much earlier, in 2002.
Back then, there weren’t many choices.
I bought the only unit trust available that tracked the US-based S&P 500.
Having read John Bogle’s Common Sense in Mutual Funds, my strategy was simple.
I would invest a fixed amount every month, like clockwork, on the same day.
I didn’t care what the market was doing.
There’s nothing wrong with this hands-off strategy.
In fact, for many investors, it’s the best approach.
But when I bought my first individual stock in 2005, things changed.
I actually felt more comfortable holding individual stocks than I did holding index funds.
That sounds counterintuitive.
After all, index funds are supposed to be the safer option.
But even the safest investment vehicle can be volatile.
Since 1928, the S&P 500 has fallen 10 per cent (or more) roughly every 1.8 years and 20 per cent every five years or so.
When that happens, if you’re watching the index too closely, you’ll be upset.
You’ll start looking for reasons why it declined.
My advice? Don’t.
The S&P 500 is made up of 500 stocks.
Singapore’s Straits Times Index (SGX: ^STI) holds 30.
Trying to figure out why all 500 — or even 30 — stocks fell at once is too much work.
And it defeats the very purpose of hands-off investing.
But here’s the interesting part.
When I held individual stocks, whenever a stock price fell, I could look at how much cash the company had. I could check whether its products were still selling.
I could see whether it was generating profits and free cash flow.
Over time, I gained the confidence that so long as the business remained viable, I had less to worry about.
Ironically, I was less worried about holding individual stocks than I was holding index funds.
Lesson 3: The rewards of holding stocks for a decade or more
The final investing lesson is the one which took me the longest to learn.
Between 2005 and 2010, the S&P 500 peaked in 2007, only to fall spectacularly during the Great Financial Crisis.
While the US market recovered starting from 2009, the index ended 2010 roughly where it started five years earlier.
You may think an index going nowhere for five years was terrible.
But here’s the thing.
During what was rated as one of the deepest recessions in 70 years, I started noticing that certain companies were thriving.
Companies like Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), Booking Holdings (NASDAQ: BKNG), and Netflix (NASDAQ: NFLX).
These were among the 25 stocks I bought and held for a decade or more.
I watched Amazon transform from an online retailer into a cloud computing giant.
I watched Netflix grow from a DVD-by-mail provider into an online streaming juggernaut with over 325 million subscribers.
I watched Booking Holdings prove that travel spending could thrive through economic cycles.
And through it all, there were benefits I did not expect.
I had a window into the future.
I knew that online streaming was coming before it happened.
I knew that same-day delivery was possible back in 2009.
It was like seeing the world through the eyes of the visionaries building these companies.
Amazon is up over 39 times from when I bought it in 2010. Netflix has grown over 313 times. Booking Holdings is up 21 times. And Apple, which people thought had saturated its market a decade ago, is up 26 times.
I couldn’t ask for more.
But I have to be honest.
Not all of my 25 stocks have done this well.
That’s the reality of investing.
But here’s one promise I’ll make you: the lessons you learn from holding stocks for a decade will far exceed any other lesson you pick up along the way.
As you spend time investing, the returns from your most precious resource — your time — should far outweigh anything else.
Get Smart: The gift of time
And that brings me back to why I congratulated you at the start.
If you started investing at 20, or even earlier, time is on your side.
You may not see it at first.
Stocks move one per cent or less in a day.
But don’t forget — that one per cent is on top of yesterday’s gains.
Compounding is happening all the time.
So slow down.
Be less worried about the day-to-day news and happenings.
You don’t need to check your portfolio every hour, or even every day.
Check in every three to six months or so.
Longer would be even better.
Go out and enjoy life.
Spend time with family and friends.
Pursue the things that make you happy.
After all, isn’t that what investing is all about — to fund a better life?
Give your investments the time they deserve. And give yourself the life you deserve.
That, I submit, is the best investment advice I can offer after 21 years.
Not all AI “winners” will survive this cycle.
But a few companies already have the scale, cash flow, and edge to pull ahead. We highlight what to look for in our FREE volatile market report. Download it here.
Follow us on Facebook, Instagram and Telegram for the latest investing news and analyses!
Disclosure: Chin Hui Leong owns shares of Amazon, Apple, Booking Holdings, and Netflix.
