Discipline in investing, something to crow about

NAV TL;DR

If you don’t have time to read through the whole article, you can check out our short version below:

Discipline and patience are needed when it comes to long-term investing.

Set aside a certain percentage of your salary every month for investing, and top up when you have spare cash.

Stick to your investment commitment even when markets fluctuate.


Be steady and disciplined when investing for the long run

In a famous children’s tale by Greek storyteller Aesop, a thirsty crow in the desert is overjoyed to find a pitcher containing some water. Unfortunately, his beak is too short to reach the water.

The smart crow devises a solution: he patiently drops one pebble after another into the pitcher. It takes some time, but he persists—until the water eventually rises high enough for him to drink it.

The crow exemplifies two virtues prized in long-term investing: discipline and patience.



Long-term investing requires a change in your perception. Many investors are driven by the fear of missing out on making a quick buck, and try to time their buy and sell decisions to the market’s fluctuations.

Depart from the herd and experience the joy of missing out, on anxiety and over-watchfulness, by taking a disciplined approach to investing. This means making monthly investment contributions and not skipping a month even when cash flow is tight.

Here are 3 ways to get started:

1. Set aside money for investments regularly

Consider putting aside a certain amount or percentage of your salary regularly for investments. You may choose to make lump-sum investments, say, quarterly or semi-annually. The point is to invest at regular, consistent intervals.

Alternatively, you can also automate monthly investments through a regular savings plan (RSP), which lets you buy units of an exchange traded fund (ETFs) or a unit trust at a fixed amount (as low as SGD100) every month. Known as dollar-cost averaging, this approach can lower the average cost of your investment and spread your risks, as you avoid concentrating all your purchases when the price is high. That way, you will not be #shook by market fluctuations.

2. Top up when you have spare cash

Complement your regular investments by topping up when you have additional funds, such as after receiving your year-end bonus or Chinese New Year hongbaos. You can also reinvest any dividends or bond coupons back to your existing holdings to grow your investment pot.

3. Persist, especially when you invest in companies with strong fundamentals

It is important to stick to your investment commitment. This means not using money meant for investments on something else that is not an emergency.

It also means staying invested even when markets fluctuate. This is especially so when you invest in a company with strong fundamentals, such as solid earnings, stable cash flows, and good management.

Market peaks and troughs are expected. They are caused by various factors, such as economic indicators, political developments, and company announcements. When markets go awry, it is easy to panic and sell your investment to trim losses. But cutting loss too early may prevent you from potentially enjoying a price recovery later.

For example, if you had invested in an ETF that tracks the MSCI World Index in end-March 1999 and sold it off to cut losses during the dot-com crash, you would have missed out on the market recovery in subsequent years.



Instead, accept that volatility is part and parcel of investing. After all, while we can learn investment lessons from the crow, markets do not move as the crow flies (in straight lines).




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