You earn SGD2k more and you put that into your investments as well. SGD102k.
The market does poorly and market value drops back down to SGD100k.
Next month, you invest another SGD2k more, back to SGD102k.
Market continues to do poorly and market value drops back down to SGD100k.
This happens for a few more months.
How do you feel?
Sometimes I fee like a fool for continuing to pump investments in and lose the value after a few weeks/months. Maybe you would too.
However, I keep telling myself, that I need to stick to the analysis and process I thought up of before the market did poorly. Which is to buy at regular intervals and ride the market down and ride the market up again. The opportunity to buy is when the market is doing poorly. When the market is doing well, that's not particularly the best time to buy. That's my system. You can agree with it or not. But that's not the point I'm driving at today.
The main point today is to have faith in your own analysis and system which you have thought of. Mine is for long term investments in good income producing assets and to buy in at regular intervals so that I accumulate more when the price drops. Similar to dollar cost averaging but not on the same stock. The aim is to keep accumulating assets so that as time passes and when markets do well, my returns would be amplified as I would be holding more assets which I bought at a cheaper rate.
Unfortunately, this is a really hard system to follow as it makes me feel foolish when I keep injecting money and losing the money, but I know I need to overcome myself. As I know that in 10 years time, all these losses would be nothing, and that my investments would be performing well after the longer horizon. I just need to keep accumulating the assets when I have additional funds at hand.
Of course this does not mean holding on to non-performing stocks or sunset industries. Many people shift out of their investment as things turn sour. Example REITs. I read many financial blogs warning against REITs. Newspapers say to avoid REITs as interest rates will rise. I'm not saying that I invest in REITs or asking people to invest in REITs. But the way the markets turn is very short term thinking. If you have faith in the property market in Singapore and are planning to invest for 10 years. Then the 1-5 year fluctuation of REITs due to interest rates should have nothing to do with you. Here I'm talking about long term investments.
If you have an investment which hits a target price and that's your system/process, then by all means sell it.
What I'm trying to highlight is that researchers and analysts will do their analysis based on the recent developments. If you keep reading and being affected by all these news, you will get distracted. It is definitely good to read and keep them in mind. However, think about them for a while and see how the news affects your investments and your goals. If your intention is to invest for the long term and your homework indicates that Singapore will be the gambling capital of the world, then do your investments based on what you think/analyse and believe. Cos your analysis is for the long term. Market researchers don't suggest investments based on 10 year horizons. They usually just comment on the next 3mths to 1 year max. Your goals and investments could be a longer horizon than their opinions.
So stay on target. Do your own homework and not get swayed by all the noise all over the place. Have a goal, have a target, aim and shoot. Trust your homework and training and research. Your target is different from others. Everyone has a different goal. If you're looking for short term returns or long term returns, they have different approaches. So don't keep changing your strategy according to how the wind blows. If you do that then you will be changing your strategy every year as each year will have a next big news. That would eventually result in your investment direction deviating from your goals which you have set.
So good luck and stay on target.