There is no shortage of investment opportunities today.
But that does not mean that you should buy any stock that comes your way. It’s an important discipline to maintain, especially when the flow of investment ideas has been strong recently.
In late October, units of Eagle Hospitality Trust (SGX: LIW) fell after questions were raised over the state of disrepair for one of its portfolio hotels, the Queen Mary. The sequence of events is now being disputed.
Last week, units of Mapletree North Asia Commercial Trust (SGX: RW0U) tanked when its key property, Hong Kong’s Festival Walk, sustained heavy damage from amid the city’s unrest. The mall remains closed until further notice.
A day later, local telco Singapore Telecommunications Limited (SGX: Z74) reported its first-ever quarterly loss of S$668 million after it took a provision of S$1.9 billion for its Indian associate, Bharti Airtel.
Major stock declines tend to attract the attention of bargain-hunting investors.
It’s not wrong to take a look if a stock declines significantly. After all, these companies could be suffering from temporary problems. And if these businesses are able to turn themselves around, stock prices could go up in response.
If so, picking up shares on the cheap could prove to be a smart move.
That said, in my view, buying stocks that are on sale is not a good enough reason. There is a more important question that you have to ask yourself.
Everyone invests for a reason.
Some are looking to supplement their salary with income from stocks. Another group might be looking for capital growth. And others might want both capital growth and income.
From where I stand, the financial goals that you want to achieve should drive the type of stocks you should own.
And that is the key to making better investment decisions.
For instance, if your goal is to build a growth portfolio, a slow-growing conglomerate such as Singtel might not be a good fit for what you need.
Now, to be clear, it’s not to say that Singtel will be a bad investment for other investors.
But if the profile of the company does not fit what you need, then it is not a good opportunity for you. And that applies even when its shares have fallen and appear to be cheap.
You are the most important gatekeeper to what goes in and goes out of your portfolio.
You alone should determine whether any stock opportunity that presents itself is deserving of your own hard-earned dollars. No one else.
It is on your shoulders to remain disciplined in sticking to stocks that meet your criteria and help you achieve your financial goals. That is especially important when the opportunities are coming thick and fast.
And if a stock does not fulfil what you need, you should be disciplined enough to let it go, even if it means that you will miss out on potential gains.
After all, you are more likely to succeed when you buy stocks that fulfil the goals that you set out for yourself.
Not when you try to profit from random stocks that present themselves every week.
None of the information in this article can be constituted as financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. Disclosure: Chin Hui Leong does not own any of the shares mentioned.