Buy And Hold And Make Good Money

Foreword from ShareInvestor

This article “Buy And Hold And Make Good Money” by Goh Eng Yeow was first published in The Straits Times on 12 Aug 2012 and is reproduced in this blog in its entirety.

Locking up an investment for years and enjoying life can result in big payoffs for patient investors

Visit any bookshop and you will find shelves crammed full of tomes offering tips on how to get rich by adopting the strategies of investment gurus like Warren Buffett.

Yet it is not so easy to deploy their strategies, otherwise we would all have become millionaires. In fact, believe it or not, holding a steady job with a regular income may be the best ticket to acquiring some form of wealth for most of us.

Let me explain. While it is almost impossible for most of us to aspire to the same riches as someone like banker Wee Cho Yaw, there are a few people in our midst who have become millionaires simply by holding down a job and enjoying what they do for a living.

They offer better inspiration on how to achieve your investment objectives than desperately trying to emulate Mr Buffett without any realistic hope of achieving the same type of success.

One good example would be my old friend, Mrs S.S. Sim, who taught chemistry for almost 40 years before retiring more than a decade ago.

Now in her 70s, Mrs Sim has quietly become a millionaire, thanks to the properties she and her husband bought some decades back.

Nothing unusual in that, given the rapid growth trajectory enjoyed by the residential property market in the past 50 years as Singapore transformed itself into a major financial centre.

But what is worth noting is that she and her husband did not deliberately set out to invest in property. Rather, they had bought them out of necessity, holding them through the decades despite the ups and down in the market.

They bought a house in the East Coast in the 1960s so they could live near the school where she was teachings. And when her mother-in-law joined her in Singapore a few years later, they bought another house down the road to accommodate her. Both properties are now worth millions.

Mrs Sim had been so busy all her life, raising her children and educating legions of students, who went on to become useful citizens with successful careers of their own, that she had no time to monitor the property market. That was lucky. Otherwise, she might have succumbed to the same temptation that bedevils most investors, and sold off her properties the moment prices shot up.

For me, it also attests to the importance of having a regular income. The steady cashflow provided by her teaching job offered financial stability in a turbulent period which encompassed the oil shock of 1973, the 1985 recession and the 1998 Asian financial crisis.

Best of all, it would appear that the virtues epitomising Mrs Sim’s life – a faithful wife, a dutiful daughter- in-law, a good mother and a dedicated teacher – can reap bountiful dividends too.

When I relate Mrs Sim’s story to my friends, some dismiss it as a lucky break from a bygone era unlikely to recur in their lifetimes.

But there may still be credence in the “buy and hold” approach adopted by Mrs Sim, which requires an investor to lock up an investment for years – or even decades – while waiting for it to bear fruit.

That rule applies not just to the property market but to the stock market as well.

One broker friend noted that, at the height of the dot.com bubble in late 1999, then out-of-favour old economy stock Fraser & Neave crashed to the lows reached during the Asian financial crisis two years earlier. If an investor had had the guts to pick up F&N then and hold it, he would have made an eightfold return on his shares, thanks to their price soaring on the back of the tussle to buy its brewery unit Asia Pacific Breweries.

Even those who missed the boat in 1999 would have enjoyed almost a fourfold return if they had bought the counter during its six-year low in 2008.

But most investors who bought F&N on both occasions would have taken profits well before its full value is being realised by the takeover battle.

Many of us spend too much of our time monitoring our investments – and get distracted into selling the winners too early.

What we should do is to put our money in assets which we are comfortable with, while enjoying what we are doing.

Think of it as the Mrs Sim strategy.