Three secrets of investment success

The market has been going through some turmoil recently, due to the problem of sub-prime loans in the US. The first thing to recognize is that this is normal and in fact it is to be expected. After a long period of steady climb, many in the financial market are now engaged in speculative activities which they normally would not do, say a year ago. In order to stay healthy, the market needs a cleansing.

In order to answer the question “what should I do now”, I shall state three crucial ingredients for investment success: To make money,

• You need to have money;
• You need to have guts;
• You need to have patience.

If you do not have money now, you should immediately start to save money, somehow. Otherwise you are way behind most people in terms of financial discipline.

If you have money to invest, and next time you see panic selling like last Friday (Aug 17, 2007), you need not hesitate. Just buy some of the best companies in Singapore. People were scrambling to sell to you, for example, UOB shares at 18.80 or City Development at 12.40. If you bought them, you are already ahead of the majority of investors who habitually buy high and sell low. Of course you would have done a similar thing during all kinds of market setback previously.

After you have bought some great companies at a good price (you are assured of this during every market turmoil), you should congratulate yourself and reward yourself by being relaxed. All you have to do is to be patient: majority of the money is actually made in the sitting. For sure there will be a time when people will scramble to buy your valuable shares at a much higher price. It could even be from the same groups of people who did panic selling in the last round.