The Sunday Times published an article by Senior Correspondent, Mr Goh Eng Yeow yesterday. The title of the article “You don’t have to be super-smart to get rich” speaks for itself and these would probably be the few keywords that you can takeaway from this article.
Below is a summary of the key points of the article:
- Blindly following experts may be the worst possible reason for buying into a stock
- We seek safety in whatever we invest in by seeking out information which lends support to the idea that our investment decision is right (Confirmation Bias)
- At the end of the day, what really matters is how to control our emotions and ensure that they do not affect our investment decision-making process
- You don’t have to be super-smart to get rich
SPK enjoyed this article and thought this was a quite a good piece for sharing. Being in the equity and real estate investment industries for years, SPK can fully comprehend what the writer was trying to say.
Controlling emotion is easier said than done. We are all human beings after all and filled with emotions. In times of panic, emotions will overcome our thinking and this could inevitably lead to irrational decisions being made. Probably some individuals can manage their emotions better than others and hence the chance of making irrational decisions might be smaller than others.
Having said that, does it mean all hope is gone for the rest of the people who might not be as capable as managing emotions than other? Not necessarily the case. Being prepared would be a good way to deal with any situation that might arise and hence, minimising the chance of making irrational decisions along the way.
Let’s use buying a property as an example. If an investor tracks the recent property news closely, he would probably feel very upbeat about the property market, with almost an enbloc sale happening every day, property price index turning up, better than expected economic growth and lower retrenchments. With daily exposure to such news, the investor would probably be rushing to pick up an investment property now, base on the ‘fact’ that prices are going to increase, future launches are going to be expensive, existing inventories are selling fast and the dear of “missing the boat”. If the investor purchase a property now and the property market heads south next year, he may not know how to react to this ‘unforeseen’ circumstance and in the worst case, he will be depressed and pressured with the financial burden and hence. He might just sell his investment property at a loss, under the fear that prices might go even lower.
On the other hand, if an investor does his own analysis and research, works out his financial planning and affordability for a potential investment property purchase, maps out a scenario route map on what to do under different market conditions, he would be in a better position to react to what happens next as there is already a framework for him to follow, rather than acting on impulse and do the ‘wrong’ things.
Well, let’s admit that none of us has a crystal ball that tells us how the property market is going to perform for the next few years. What we can do is to try our best to analyse and have a view on the market based on today’s condition. But what is more important is to be prepared to react to whatever that doesn’t happen according to our plans.
Probably this is something that we can apply to all parts of life and not just for investment.
Keep Calm and Be Prepared!