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3 Secrets to Market-Beating Returns

 

Somewhere in this world, there will always be people looking for the holy grail of investing. In case you have no idea what it means, it simply refers to a superior investment methodology that when applied, will make one lots of money and be ahead of everyone else.

As cliché as it may sound, such a thing does not appear in reality; and investors often tend to spend too much time chasing after this fallacy to the point where a great deal of opportunities are wasted during the period.

That said, if you examine the track records of the investing legends who have consistently out-performed the stock market as a whole, you would see some common traits that anyone can adopt easily to their own investment portfolios.

Without further ado, let’s look at 3 ‘secrets’ to market-beating returns:

Secret #1: Invest in what you know

When it comes to picking out some of their best investments, investment gurus like Warren Buffett and Peter Lynch have always stuck to what they know or could easily understand. One famous example is where Warren Buffett avoided the dot-com crash by refusing to dip into technology stocks during the era and focused on companies that spun off profits year after year instead.

An example is Old Chang Kee. Curry puff lovers who are vested in the company since its inception on year 2010 would be sitting on 168% gains today, notwithstanding the tasty 10% dividend yield based on its S$0.03 dividend and a share price of S$0.30.

Secret #2: Stick to your Guns

While many people know that investing takes time to generate returns, just like how we need to wait for seeds to blossom into huge trees, they often do the exact opposite. They usually treat the stock market as a casino and trade in and out, hoping to make a killing.

In addition, most investors have committed the mistake of selling the winners and holding on to the losers. Peter Lynch has once commented that his overall success can be attributed to a small number of stocks in his portfolio that returned big and coined them “multi-baggers”, which means that the stocks have appreciated multiple folds in value.

On the local front, Vicom is one that fits the bill. Even though it may have stagnated during the period (2000 – 2006), it started to stage a growth phase from then on, achieving a 721.05% return till date. Anyone who have off loaded the stock in year 2006 would probably be swearing as the stock continues to run ahead without them.


Vicom

Secret #3: Impeccable Track Record

In my past 8 years of investing journey, I have dabbled in many different categories of stocks, be it growth stocks, turnaround stocks or income stocks etc. One thing I found out is that strong companies who managed to deliver on results constantly are inclined to continue doing so, as opposed to “turnaround” stocks which most of the times don’t turn around at all.

One famous example I have given way back in another post is Tigerair. At the time of writing, Tigerair is trading at S$0.415. Today, its stock price stands at S$0.32 even after a slight rebound, down almost 30% from then. Till date, it is still in the red and I personally do not foresee any recovery in place for the near term.

On the other hand, one can look at Sheng Siong, where its share price has jumped 117.95% from S$0.39 to S$0.85 in a short 3 years period. We can simply take a look at the number of stores Sheng Siong has been building these past years to know that the company is on a stable growth trajectory.

Conclusion

With that, I hope you have enjoyed the 3 secrets of investing although they are nothing special but rather, a change in investing behavior and mentality. Thus, I strongly believe that anyone can achieve noteworthy returns from the stock markets, be it professional or novice investors, so long as they can remember the secrets to heart.

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