This post was originally shared in my DT Email Newsletter here.
It’s normal to feel lousy about your stocks. I still do.
When share prices plunge, I check my phone… and all I see is a sea of red. My hard-earned money is now lower than before. The voices in my head will start screaming loudly at me:
“Just sell now! Get out of the stock!”
I’d feel terrible. But don’t let these emotions take over you.
I’ve made my living in the financial business since 2010. I can tell you this – Mr. Market and the people in this industry will often try to sell you whatever it’s highly popular.
Some of my best investment ideas are never popular.
Think about stocks during Black Monday in 1987. Think about how stocks were unpopular during the Global Financial Crisis in 2008. And think about how stocks were unpopular during the COVID-19 outbreak.
When Mr. Market is happy, investors believe it’s time to buy. When Mr. Market is moody and down, investors believe it’s time to sell.
Mr. Market is highly emotional. Sometimes, its prices are not based on logical conclusions. As a dividend investor, I’ve learnt not to let Mr. Market tell me what to do.
Instead, I treat Mr. Market as a business partner. A partner offering us to buy or sell stocks to me at different prices every day.
I almost gave up
In 2015, I started accumulating shares in a Singapore-listed company that was one of the biggest sellers of instant mix coffee in Russia. The brand MacCoffee.
At that time, I knew its business had sound fundamentals: growing revenues, steady earnings and had the largest market share. Food Empire Holdings was a market leader.
The big problem? The Russian crisis unfolded. The rouble crashed and the shares I’ve bought in this instant coffee seller sank. At one point, I was down more than 36%. Shares just wouldn’t stop sliding.
It was painful. Like any normal person, I was terrified. I wish I could hide my head under my pillow and cry. Was I wrong this time? The “voice” dominated my head, telling me I should “cut my losses.”
Even a close investing friend said: “Willie, I’m not sure you should even hold onto this stock. It’s risky.”
I had huge doubts. I almost wanted to sell everything. I almost gave up.
For a few days, I did nothing. I stared at the stock chart and replayed worst case scenarios in my head:
- What if shares keep going down?
- What if Russian consumers stopped buying?
- And profits wiped out?
The easy way out of this stock bashing is to sell the stock. Click one button, take the loss, move on. But deep down, I knew I wasn’t reacting to new facts about the business. I was reacting to fear.
Now, this was at least ten years ago. There weren’t as many financial blogs at that time. There wasn’t any financial information on YouTube or social media yet.
There was almost zero information about these Singapore stocks. I could only rely on my due diligence.
So if I was going to make a decision, it has to be based on sound analysis. Instead of panicking, I went back to my research. Now, the company was still the largest player, cash flow was intact.
Business hadn’t deteriorated overnight, probably just a rough patch.
I picked myself up, and even decided to have a chat with the company’s management.
I believe good research triumphs over bad emotions
I decided to stay focused, instead of just feeling terrible.
One afternoon, I walked into a huge meeting room. I could still remember the faint scent of aged wood filling the air. I could tell the room was used for the occasional serious discussions made behind closed doors.
Then the founder walked in. With my notebook in hand, we spoke at length.
I picked up signs they were very prudent during tough times — knowing how to keep a tight control on credit extended to distributions and were very aggressive in collecting their payables.
This allowed them to squeeze out cash flow during the worst of times. It had good business execution.
At that moment, my fears subsided. I scooped up more shares. And I waited. I even shared my ideas with close friends.
In 2016, shares of this Russian company began climbing back. In two short years, the stock began to recover. And I sold off for a tidy profit.
Since quitting the rat race and steadily growing my dividend portfolios, I learnt investing isn’t making big predictions, or calling the next crisis.
You can’t time these things. I believe we have the discipline to stick with our research when Mr. Market makes us feel uncomfortable.
I don’t let short-term fear overshadow long-term thinking
Often, the tough decision is going with the inconclusive evidence from the share price movements.
When you’re feeling lousy about your stocks, this is what you need to know. As long as you commit to growing your wealth in the long term for retirement, don’t let a falling market cause you unnecessary anxiety.
Sometimes, investing can be simple.
Willie Keng, CFA
Founder, Dividend Titan
