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Investor psychology and beating our fears.

Friday, February 17, 2017

This blog is a follow up to an earlier blog titled:

Increased investment in Religare Health Trust by more than 150%.

This is in response to a request by Reader A.

 We should expect volatility in prices. 

In fact, we should welcome it as investors. 

If we do not have the stomach for volatility, stocks could be a bad place for our money.


In a situation like that, apart from having an idea of what is a decent price to pay, how do we prepare ourselves mentally to pull the trigger?


To what extent can we afford to be totally wrong?

After all, if we are totally wrong, we could lose all the money we invested. 

Can we stomach that?

It is all about having peace of mind as investors. 

If you have forgotten or have never read my blog on that before. 

Read it: HERE.


1. Don't use borrowed funds.

2. Don't use funds earmarked for other purposes.

Use only money we can afford to lose and meant for investing for income.

Even though it is money we can afford to lose, ask: 

How much of it can we lose without losing our minds if things should go wrong?

Of course, we want to avoid being wrong. 

We try our best to get our facts and reasoning correct.  

However, despite our best effort, we could still be wrong.

We want to be greedy when others are fearful but we don't want to be so greedy that we throw prudence out the window.

The resulting monetary loss from being wrong must be something we can stomach easily.

Otherwise, don't be in doubt. 

We really should stay out.


JB said...

Hi AK,
In the absence of news on what could have caused the drastic fall in price of RHT that day, how certain when you pull the trigger to buy that there may be negative reports (e.g Noble situation) which could have affected the fundamentals of the company. After all, we are retail investors who may not know first hand info.

Thank you for sharing.

JB said...

Hi AK,

Not sure my previous comment was published as I accidentally clicked something. When the price of RHT fall drastically the other day, what went through your mind? In your previous post, you mentioned you had a price in mind, that is first step and your analysis of company based on recent reports. But in the absence of 'NEW' news that causes the plunged (e.g possible negative reports like Noble case), how certain were you in pulling the trigger to buy? Were there doubts? After all, we are retail investors who may not have the first hand info.

Thank you for your sharing.


AK71 said...

Hi JB,

The answer to your question is in the blog.

Read the parts in BOLD print again. ;)

JB said...

AK , thank you for your reply. I have re-read your blog again, JB understand slow slow...haha.
By the way, how often do you review the company you bought? Every quarter after result announce? Or every day , check for annoucements?

AK71 said...

Hi JB,

I try to keep up with the announcements but, often, I am a bit slow. :)

AK71 said...

Hi AK, I've been reading your posts on savings and emergency funds as I'm trying to plan my exit from my company. I have a qn as I was reading it. Do you save for mid-term goals (3-5 years later stuff) in your regular bank acct or would you invest it? Cos I'm thinking of furthering my studies in a couple of years. And hopefully get married lah.

See the two points I made. 🙂
Especially point no. 2.

AK71 said...

When the bad news kept coming in 2008, how were you reacting? I know you kept buying but didn’t you have the slightest fear?

We don't have to go too far back for the answer. The answer is in this blog ;)

AK71 said...

"Shareholders of India's Fortis Healthcare have approved a subscription of shares by Malaysia's IHH Healthcare, fulfilling a key condition for the acquirer to eventually aim for a majority stake.

"In a regulatory filing on Wednesday (Aug 15), IHH said that Fortis shareholders approved an increase in the authorised share capital of the company and IHH's subscription of a 31.1 per cent stake in the company's enlarged share capital for about 40 billion rupees (S$789 million) in a preferential allotment.

IHH has also agreed to make an open offer to acquire an additional 26 per cent for about 33.5 billion rupees. In total, IHH could spend more than 73.5 billion rupees on the acquisition."
Source: The Straits Times, 15 Aug 18.

Reader says...
IHH bought Fortis.
So RHT deal also is part of if it based on my reading right?

AK says...
IHH is now the de facto biggest shareholder of RHT.
The deal should go ahead.
Even if they decide not to, it is reasonable to expect RHT to do better under IHH in future.

"Talks on the sale of RHT Health Trust's assets to its controlling unitholder Fortis Healthcare have progressed further, with both sides on Feb 12 signing a master purchase agreement for Fortis to pay 46.5 billion Indian rupees (S$950 million) for the trust's entire portfolio of healthcare assets.

"The consideration will be fully satisfied in cash. The news drove units of RHT Health Trust up 12 Singapore cents or 17 per cent to S$0.83.

"The proposed disposal will result in the sale of all of RHT's Indian subsidiaries and its 49 per cent interest in Fortis Hospotel, as well as the entire asset portfolio of RHT, which includes its interests in 12 clinics, four greenfield clinics and two operating hospitals in India."
Source: The Business Times, 13 Feb 18.

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