Whenever supermarkets here in Singapore slash the prices of selected grocery items, you would almost certainly see aunties (or even uncles) grabbing a whole bunch of such items if the stuff happen to be on their regular shopping list.
Then again, this simple act of buying groceries on the cheap can also be adapted to an investment perspective. Benjamin Graham, the father of value investing, once quipped that we should shop for common stocks the same way that we buy groceries. In the stocks investing world, value investing is a popular strategy practiced by many renowned investors and fund managers like Warren Buffett and John Templeton.
How We Can Learn From Grocery Shopping
A classic example here is to talk about my mum’s shopping habit when she goes to NTUC supermarket. She will automatically form an invisible household checklist in her mind that has an amazing memory space and proceed to check for any discounts related to the products.
Although it might not seem special or even trivial to most people, we can actually take away 2 investing anecdotes from this.
#1: Knowing What To Buy
When my mum enters the supermarket, she already has a list of what to buy (or rather, what my entire family wants to buy) based on every individual’s preferences. On the other hand, investors often commit the mistake of not even knowing what they are buying!
Avoid buying stocks based on a hot tip from your friend or even relative because you will then be at the mercy of the stock price. When it rises or falls just by a small margin, you will be tempted to sell it off without understanding the underlying operations and prospects of the firm.
In actual fact, you can just do some basic research as you go about your daily lifestyle. For example, to shop at Bugis Junction or Plaza Singapura? They are owned by Capitamall Trust (SGX: C38U). Or for instance, to hop onto a taxi instead of taking public transport when you head out during the weekends? ComfortDelgro (SGX: C52) has the largest market share in Singapore when it comes to cabs. On the other hand, if you have some specialized knowledge in a certain industry like the oil and gas sector, you can even look at Ezra Holdings (SGX: 5DN), a leading provider of integrated offshore solutions.
#2: Bargain Hunting
The point I want to make here is rather straightforward. What do you do when the stocks come down? The answer is simple: you buy as much as possible as they will give you more bang for the buck now! However, time and again, investors often flee away in fear (during recessions) when stocks are selling at a discount.
One example is DBS Group (SGX: D05). Back in the dark days of the U.S. sub-prime crisis during 2009, DBS was trading at only $7+. Fast forward to today, DBS is now worth $18+, an increase of 250% over 5 years! Nonetheless, I would like to highlight one crucial point: shoppers are willing to buy groceries at bargain prices because they know the intrinsic value of the goods. Similarly, buying more of those shares when they are priced at a discount does seem like common sense. It is no different from buying more of those items that you like when they are on offer at the grocery store.
To sum it up, investing is not as difficult as what many people perceive it to be. The reason why many fail to get started in stocks investing is because of limiting myths passed down from either their family members or friends. Nevertheless, you can now think of investing to be like grocery shopping. Focus on what you believe in and buy only during discounts you deem attractive (like the GSS sale). Follow this maxim and you will likely go very far in your investment journey.
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