September 18, 2018
Peter Lim, who is among the wealthiest people in Singapore, is a self-made billionaire who made his riches through investments in Wilmar International Limited (SGX: F34), properties, healthcare businesses and sports.
According to Forbes Singapore’s 50 Richest list, Lim had a net worth of S$2.5 billion (as of 25 July 2018), having cashed out on Wilmar eight years ago.
In 2007, the billionaire gave two separate interviews to The Business Times and The New Paper. From those interviews, I picked out some interesting pointers that investors should keep in mind when it comes to investing in stocks.
Keep emotions in check
The stock market can be extremely volatile.
For instance, last Friday, Singapore’s Straits Times Index (SGX: ^STI) rose around 30 points. Yesterday, the index was down 20 points, erasing much of the gains made last Friday. The same goes for stocks we own. One day, our shares may be down 1%, and the next day, they can rise 2%. We should neither be sad nor happy when such things happen, according to Lim:
“I used to say to my friends, ‘When you are holding stocks, if it goes up, don’t be too happy; when it goes down, don’t be too sad’.
‘Otherwise, how? Your life will also be fluctuating and you’ll die of a heart attack. If you really lose sleep over it, maybe the best way is to keep the money in the bank.’”
An excellent way to keep emotions out of investing is to write down the reasons for buying a stock. If the fundamentals of the company have not changed, but the stock price is coming down for reasons not related to the business, it could be an opportunity to buy more of the company.
Lim also does not track the daily ups and downs of the stocks that he owns. Such “inaction” can also help us shift our focus to the business — and not the stock price.
Assess the management
Lim likes to look at the person running the company when investing. To assess the management of a firm, one has to look at whether the person is honest, and if he or she is an expert in their trade. Lim commented:
“It works. It’s a tested method of assessing companies.”
Warren Buffett, one of the world’s best investors, also likes to access the management of a company before investing in it. The Oracle of Omaha favours company leaders who are honest and competent.
Ride the trend
Lim’s secret to successful investing is “prospect” – he takes a top-down approach and invests in sectors if they have good prospects. He mentioned:
“Like if I think solar is good, I go into solar; if I think palm oil is good, then palm oil.
Share prices go up because the sector grows. So if I think this sector is going to be good in the next 10 years, then I’ll just invest in it.”
It is much easier to ride the wave than go against it.
A key ingredient to Lim’s success is patience. He does not like to trade – which is to buy one day and sell the next to lock in profits. He said that “people who get rich are those who buy a company, build it, run it”.
In The New Paper interview, he had advice for young investors (which could also apply to all):
“You have to invest with a longer-term mindset. You buy a good stock, leave it there for 10 years. Come 10 years, this dollar can be many, many multiples.
I think the trick is really to think long-term.
You may not have a lot of money, but you have a lot of time.
The minimum length of my investments are five to six years, if not 10 to 12 years.”
It takes time for businesses to grow; they certainly do not flourish overnight. Warren Buffett once remarked that we should only buy something that we would be perfectly happy to hold if the stock market was shut down for the next 10 years.
The Foolish takeaway
Peter Lim made his wealth through patient, long-term investing. He did not worry about the short-term fluctuations of the stock market. In fact, a week before the interview with The New Paper, Singapore’s stock market took a sharp dive, wiping out more than $100 million of his stock’s value. However, Lim was unruffled. Having been through many crashes and financial crises, he knew that things would turn out fine after all, and it did.
During our investing journey, we, too, would be hit by many stock market ups and downs. However, if we focus on the right things, we would do just fine as well.