Keep Good Friends – And Good Stocks

Foreword from ShareInvestor

This article “Keep Good Friends – And Good Stocks” by Goh Eng Yeow was first published in The Straits Times on 17 Aug 2014 and is reproduced in this blog in its entirety.

Just like with solid friendships, staying the course with choice stocks can leave a person richer

Over the years, I have been fortunate to get plenty of excellent investment advice as a financial reporter.

One common thread in the best of this wise counsel is the principle of not simply trying to get a better return on my investments but to live a better life too.

In short, to invest the way I would like to live.

One of the best pieces of investment advice I ever got was non-financial: to cherish the close friendships I have nurtured and not allow them to lapse for whatever reason.

I have also been advised not to pay too much attention to the so-called friends who specialise in taking from others without giving back. These fair-weather friends may try to make use of me for their own ends, only to dump me when I am not useful any more.

It is advice that runs contrary to the cynical dictum that I often hear in business circles: There are no eternal friends or enemies. What counts is the money to be made.

Over time, I have come to realise the astuteness of placing great value in meaningful friendships.

I have met people who are incredibly successful in their businesses and careers. But they lead very lonely and unhappy lives because they do not have any close friends – just business acquaintances. Some are even estranged from their families.

I was greatly saddened by the death of the Oscar-winning actor Robin Williams, who took his own life as he reportedly battled money problems and depression. One of Williams’ friends described him on entertainment website Radar Online as someone who was very generous to friends and family at the height of his career, helping out anyone in need.

But the question that crossed my mind was: Where were these friends when he needed them most?

As two of my colleagues prepare to leave the newsroom to pursue other careers, my parting advice to them is to treasure the friendships they have built during their years at this newspaper.

Many of the newsmakers and public relations people who feted and pampered them in the hope of getting good publicity may not want anything much to do with them, now that they are not reporters.

But they are likely to encounter a few who turn out to be genuine friends – the sort of people who stick by them through thick and thin – if they ever run into a spot of trouble. These are the people they should treasure.

It is all too easy to allow such wonderful friendships to lapse, as many people seem to retreat into virtual worlds in front of a screen.

Face-to-face gatherings are easily snuffed out by excuses like: “Oh, so sorry, I can’t make it this week, or next.”

In hindsight, what I have observed about true friendship also applies to investing.

Too often, as soon as an investor buys a stock, he is already planning an exit strategy, as he looks at how to dump the newly purchased stock.

Of course, taking profit is not a bad thing. But simply selling a stock because we have made a quick buck misses the point about investing.

Just consider the returns made by the 30 component stocks in the benchmark Straits Times Index over the longer term.

Six of these stocks offered total returns in excess of 20 per cent a year in the past 10 years. Another 13 offered returns in excess of 10 per cent a year.

In my case, the great store I have set by friendships has influenced the way I have invested.

Just as fire tests gold, so adversity is the test of strong friendships, to paraphrase the Roman philosopher Seneca. I extend this maxim to the “buy and hold” strategy I adopt for my investments.

I have had the good fortune to own shares in a few of the STI component stocks that offered double-digit percentage gains, and have kept them over the decades despite the upheavals that occasionally bedevil the stock market.

As a dedicated long-term investor, I endured the 2008 global financial crisis with my investment portfolio staying virtually unchanged, and made only a couple of small changes at the fringes.

This strategy has reaped dividends for me, given the generous payouts these companies made as their businesses prospered in the past six years. I have also enjoyed a paper gain on my investments as their share prices appreciated.

But looking back at those rough times in the market, the one reason I could stay the course was that these stocks had become like old friends to me. It would have been callous to ditch them because they had run into temporary difficulties.

So, just like having lifelong friends, it may not be difficult to achieve extraordinary returns by buying the shares of good companies with which we are comfortable, and then to hold on to them.

It reflects the way I choose to live, and I have been much richer spiritually and financially for it.