Being attached to your stock purchases

To be a good investor, one has to be detached from his stock purchases. Many investors invest in the stock market and cannot live without looking at how their purchases have done for the day. Do you feel excited when you see profits and when the market is bullish? And feel sad when the market is bearish? Monitoring your stock purchases everyday doesn’t help. Only traders monitor their stocks everyday. An investor’s target should be long-term and monitoring the stock movements everyday doesn’t make the price go up higher. It only takes you on an emotional roller-coaster ride. If you monitor it everyday, you would feel like selling it when it goes down a few cents, as you cannot bear to see loses. Buying and selling erodes your profits and ROI as you need to pay commissions.

Also, when the target price of your stock purchase has been reached, you have to sell and look for other stocks to roll the money. Don’t be attached to the stock emotionally and be unwilling to sell the stock just because it has served you well for the past few years. For example, I purchased Raffles Medical on 25th June 2009 and sold it on 26th August 2009 at $1.24. I only held it for 2 months even though my initial target was to hold it for at least 5 years. I sold it off at $.24 as that was the intrinsic value that I calculated at that time. It is an extremely good business as it has FCF, high ROE, low debt and it’s a defensive stock. Now, the current price is at $1.71. Am I regretting selling it at $.24? Not at all. Once the value is reached, I sell it and not look back.

So, don’t be emotionally attached to your stocks. Practice detachment. Fear and greed are an investor’s worst nightmares. Benjamin Graham says it aptly: “The investor’s chief problem – and even his worst enemy – is likely to be himself”.

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One thought on “Being attached to your stock purchases

  1. I can´t believe it! I also bought Raffles Medical a few months ago just like you. I planned to hold if for years. I bought at about 1.60, but when it amazingly went up to 2.28 I sold it …sold at around 2.25. At that price the PE was over 30X and clearly overvalued. With the proceeds I bought Super Group.

    I previously ruled out Thomson Medical since it specialises in births/deliveries and I can´t see a future with such a low birth rate in Singapore…and with competition from other hospitals including Raffles.

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