THE ESSENCE OF INVESTING
Have you felt turbulences before on a long-haul flight? If yes, that is only common. However, feeling fearful whenever turbulences are felt, or worse, wanting to get out of the airplane whenever there are turbulences is not. We have all travelled on an airplane before, and haven’t we all arrived at our destination safely despite all the turbulences felt during the flight? Our investing journey is the same.
Most people invest monies they need only in 10-20 years’ time but get emotionally involved with the daily movements in their investment accounts. If we could rise above “others” in investment wisdom and come back to the purpose of why we are investing, we can then look beyond the day-to-day gyration in asset prices.
Over the long term, good quality companies prosper and will go on to set record profits 3, 5 and 10 years from now. This is especially so for the structural growth winners in our refined investment methodology to be shared with you in the next section. The current temporary marked-down prices of your investments serve no purpose other than to give you an opportunity to buy a piece of these wonderful companies at a big discount.
We urge you to take advantage of the wonderful discount presented to you during this window of opportunity. When you need the money from your investments 10-20 years later, these marked-down prices would have been long gone. Only the rewards and sweet memories of your heroic decision during this time would remain.
Structural growth winners
We are excited to share with you our revised investment methodology, called the H.E.R.O. methodology. H.E.R.O. stands for Honourable, Exponential, Resilient and Organisation. This methodology uses the timeless value investing philosophy and is adapted for the present environment.
We recognise a few elements that are prominent for the investment world today:
A) Disruption: We are in the era of technological revolution. Many companies which cannot innovate to stay relevant would become obsolete. The Honourable and Exponential tenets select only the companies that have the hunger to innovate, which would become the structural winners of tomorrow.
B) Concentration of profits: We are seeing a winner-takes-it-all syndrome. This leads to a concentration and acceleration of profits for the winner and a rapid decline in profitability of the losers. Investment in the winner reaps a large and rapid reward. The Exponential tenet selects only the winners.
C) Slow economic growth: The last decade has been marked by a period of slow economic growth. In the next decade, we think the trend would remain. The situation would be exacerbated in a recession as the world is running out of tools to revive an ailing economy. The Exponential, Resilient and Organisation tenets ensure we invest only in companies that are growing despite slow economic growth, and are resilient due to their business model as well as run with a culture of stewardship.
We will also strive to select mutual funds and ETFs that contain these structural winners.
We think that this stock market decline has more room to fall. As such, we will be progressively adding equities to the portfolio based on the following to ensure we have enough dry powder to invest during an extended stock market discount:
- The level of decline in the equities market.
- Specific events that mark the next stage of investment market stress. For example, when volatility appears in safe assets like money market instruments, or the default of significant global banks.
At the same time, we are reviewing the capital preservation portion of our portfolio to keep them as safe as possible. This is to ensure our dry powder stays dry.
Do speak to your Unicorn consultant if you have further queries.
Note: We will increase the frequency of our communication with you to weekly during the current turbulent times. We will continue to communicate monthly with you during usual times.
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