July 11, 2021

Cut chatter to make sound investments

By ellen

Imagine trying to pick your meal from a restaurant menu that is a thick folder with five pages for appetisers, 10 pages worth of main courses and just as many for desserts.

As you figure out what to order, you google for reviews, recall your friend’s recommendations, pore over the photos on social media, and flip the pages back and forth multiple times.

If this starts to feel overwhelming or even frustrating, you are probably experiencing something called analysis paralysis. Having the luxury of choice may sound like a good thing, but sometimes having too many choices can lead one to overthink things, making it hard to make a decision at all.

This affects many of us in various aspects of our lives – in careers, relationships, and often at the beginning of our investment journeys.

“That is a dilemma faced by many novice traders. They think there is a right or perfect answer they can find,” said Mr Phan Vee Leung, who founded TrackRecord Trading to help the retail community understand the markets as professional traders do.

“But if you listen to enough people, there will be enough reasons to take a long position and if you listen to enough people, there will also be enough reasons to go short.”

He was speaking to Money FM 89.3’s Bigger Picture host Ryan Huang in a special interview that was aired recently.

It is not hard to see why it can be daunting for a beginner.

If the Singapore Exchange (SGX) were a restaurant, it would be a menu with nearly 700 items based just on the number of companies listed on the SGX mainboard and Catalist.

Factor in overseas exchanges, and the list runs into thousands of options for investors to choose from as they navigate market commentary, news headlines, and pundits adding to the chatter. Some may not realise that the act of not making a decision is ironically in itself a decision. For investors who put off doing so, that can mean missing out on opportunities.

Investors who still struggle to pick out a single stock can consider starting with an exchange traded fund, which covers the market or a specific sector.

There are also regular savings plans by banks that help allocate a fixed sum every month into investments – which can offer a disciplined and structured approach.

“So what investors can try to do is simplify their process, for example, by having a checklist or decision-making matrix on what they are looking for. Find credible sources of information. No one is going to be right all the time; start with the ones that you should trust,” said Mr Phan, who is also his company’s chief investment officer.

He explained that the important thing is to get started one step at a time, and realise that it is a process where everyone is likely to get something wrong and make mistakes along the way.

“You have to accept that losing is part of the process, you cannot go into this journey thinking that every investment should be making money or every trading session will be a positive gain. There will be ups and downs. You have to come to the realisation that you are not a superhero.”

For more of such interviews, go to omny.fm/shows/money-fm-893/ or tune in to The Breakfast Huddle with Elliott Danker and Finance Presenter Ryan Huang on weekdays from 6am to 9am.