The “Thing” That Matters Most In Investing

 

What is the most important thing we need in order to consistently accumulate wealth from this world of investing?

Is it diligence, decisiveness, opportunistic or even luck?

Let Me Digress Abit

Before that, I would like to highlight that I had the opportunity to attend a CFA Society Singapore event on the topic of Forensic Accounting in Asia. The speaker Tan Chin Hwee is the founding partner in Asia for Apollo Global Management, a leading USD162 billion global alternative investor, among the top three in the world! He was voted by the Hedge Fund Journal as the emerging top 40 absolute return investors globally and was also named the Best Asia Credit Hedge Fund by The Asset. Mr Tan also sits on the board of various for profits and not-for-profits board as well as being the past president of CFA Society Singapore.

This session was also to partially introduce Mr Tan’s newly published book. He was the co-author of the book Asian Financial Statements Analysis Detecting Financial Irregularities. Something to note was that all proceeds from his book sales on that day were donated to a hospital of his choice. He definitely wasn’t in this for the money 🙂

I was first introduced to this book by Jun Hao (Our partner) from theasiareport.com and I found it to be a rather good read! If you are looking to arm yourself with the knowledge of potential pitfalls in Asia, I would strongly recommend you to get your hands on one of his book!

 

 

So What Is The Most Important Thing In Investing?

During the CFA Society Singapore event, Mr Tan asked the exact same question to us, garnering a wide variety of replies from the audience.

When the dust settled, Mr Tan just mentioned a single word – Humility.

From his wealth of experience in the investing community, he was of the opinion that being humble was the key to consistently survive in this “cutthroat” industry.

This brings to mind a saying that I have heard many a times from industry players, “the market has a humbling effect on you”.

Mr Tan quipped that no matter who you are, a CFA or a CPA, it doesn’t matter in the market; your credentials don’t mean a thing. What matters the most is your Profit and loss (“P&L”), as a fund manager what your clients care about would be your P&L figure. The market is a very unforgiving place – it doesn’t give two hoots about your reputation and track record. In the event that you make the “wrong” call, the market would still beat you down. Just check with Anthony Bolton, one of UK’s best known fund managers, when he started Fidelity China Special Situation PLC back in 2010!

 

Introducing Mr Market

This was by no means a novel concept. Back in the days, Benjamin Graham coined the term “Mr Market” in his book The Intelligent Investor.

Imagine Mr Market as a neurotic entity. Every single day he would have a proposition for you, however his offer depends on his moods. His moods can fluctuate anywhere between incredible optimism and overwhelming depression. One day he will quote a higher price to buy or sell, the next day he might increase it, lower it, or even appear uninterested. This is pretty much in line with how the stock market works based on the opinions of market participants – us.

 

How Does Being Humble Help In Investing?

In my opinion, behind humble would mean being able to learn from our experiences. If we continually commit the same errors like being influenced by the herd, chasing after fads without due diligence, it would just be making the same mistake over and over again. Making mistakes is normal – it is part and parcel of an investor’s adventure. What’s important is that we build on these experiences and become an improved investor!

Another benefit of humility is that sometimes when we take a step back, we would be able to see the bigger picture. We can only control what is within our control and for the rest, well it might make our lives much easier just to accept them J

This is one of the key reasons that we value investors incorporate the “margin of safety” concept in our valuations! If all the bad news is already accounted for, the only way we can go is up! We can’t control how a company operates but what we as investors can do is control the price that we buy them at!

 

Value In Action

We aren’t saying that humility in the market comes easy; however it is definitely widely regarded as a quality that would enable you to consistently accumulate wealth in this industry! Along with making money, we also hope that each and everyone of you out there can have fun in the process of investing!

 

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All views and opinions articulated in the article were expressed in Mun Hong’s personal capacity and do not in any way represent those of his employer and other related entities. Mun Hong does not own any shares in the companies mentioned above.

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