Just started investing? Here are 4 truths to live by

AS WE step into 2025 and embrace the Year of the Snake, many of you may be gearing up to make your first move in the stock market.

Maybe you’ve received a generous bonus or saved up a nice chunk of money, ready to invest in stocks and start growing your wealth. The good news is you’ve taken the most important step in what could be a rewarding financial journey. Investing in shares is one of the most powerful ways to build wealth and create a source of passive income.

I made my first investment nearly 20 years ago, purchasing shares in the initial public offering of Suntec Reit. Looking back, I’ve learned a lot – and I want to share four key lessons that I wish I had known when I first started.

These insights could have made a big difference when I was just beginning. I hope they’ll guide you as you work to grow your money for retirement.

Volatility is part of investing

Volatility, defined as sharp, unpredictable swings in stock prices, is a natural part of the market. Events such as business news, corporate announcements and earnings reports can move stock prices, but there’s often no clear reason for a stock to jump or drop on any given day.

Take OCBC, Singapore’s second-largest bank. In January 2019, its shares were priced at S$11.38. By the time the pandemic hit a year later, they had fallen more than 30 per cent to S$7.81. Yet, just five years later, the shares have more than doubled to S$17.04.

New investors may find this volatility unsettling as they watch their hard-earned money rise and fall from one year to the next. But instead of fearing it, try to view volatility as an opportunity.

Investor sentiment often drives short-term price swings, but when you focus on the company behind the stock, you’ll realise that volatility can be a chance to buy quality businesses at a discount, when others are selling in fear.

Strong companies with solid fundamentals occasionally experience price drops for no real reason, and this creates an opportunity to buy at a lower price. Once you accept that volatility is part of the investing landscape, you can use it to your advantage instead of being intimidated by it.

Learn through theory; hone with practice

When I first started investing, I was a voracious reader. I kicked things off with basic investment books such as Peter Lynch’s One Up on Wall Street. As I progressed, I dived into value investing with books like The Intelligent Investor by Benjamin Graham and The Warren Buffett Way by Robert Hagstrom.

Reading is a great way to get familiar with the ins and outs of investing and build your foundation. As I devoured book after book, I began to feel pretty confident in my knowledge. At least, that was until I branched out and started buying stocks beyond Suntec Reit.

Looking back, I realise my overconfidence got the better of me. All the reading did not fully prepare me for the emotions that came with actual investing. Despite having absorbed a lot of knowledge from those books, I still made mistakes, and bought the wrong stocks.

What I quickly learned was that the books didn’t equip me with the emotional resilience needed for investing, nor had they taught me how to dive into the kind of detailed research required for making smarter decisions. It’s like reading a book about riding a bicycle, but never actually getting on one.

So, here’s my advice: Start by reading to build your investment knowledge, but complement that with hands-on experience by investing real money. This approach allows you to sharpen your real-world skills, manage your emotions, and apply what you’ve learned to analyse actual companies. It’s a powerful combination that will help you grow and improve as an investor over time.

Don’t beat yourself up over mistakes

I’ve always been a bit of a perfectionist, and I really don’t like making mistakes. When I first started investing, I quickly realised I was making all sorts of errors, which left me feeling defeated and put me close to giving up on investing altogether.

Back then, no one told me that mistakes are a normal part of the investment process – and that it’s important not to beat yourself up over them. In fact, making mistakes early on, when your capital is still small, is good because the financial damage is minimal.

As your portfolio grows, though, mistakes can become more costly. That’s why it’s crucial to learn from them.

One useful tip is to keep a journal of your mistakes. It’ll help you remember those tough lessons and prevent you from making the same errors again. Even better, try to learn from others’ mistakes. Talking to more experienced investors can give you valuable insights and help you avoid pitfalls along the way.

Give yourself time to learn and grow

Patience is one of the most important traits beginner investors should develop. When I was just starting out, I was eager to absorb as much as I could in the shortest time possible, hoping that would lead to quick rewards. Looking back, I realise I should have taken a more measured approach, and focused on truly learning instead of rushing to gather information.

It’s important not to rush the process of getting rich. Instead, take your time to understand the stocks you invest in and how they fit into your strategy.

Investing is a journey of continuous learning, where you gradually build the skills needed to navigate the stock market with confidence. These skills are crucial, especially when you face challenging macroeconomic conditions, or when unexpected events affect the companies in your portfolio.

There’s no shame in taking your time to build wealth. Just look at Warren Buffett, one of the world’s most successful investors. His slow and steady approach is a big part of his success.

As you gain experience, you’ll develop a “circle of competence” – an area where your knowledge is strongest. For example, an engineer might have a better understanding of engineering stocks, and someone in the pharmaceutical field will likely have a deeper insight into the medical industry.

Over time, you can expand that circle by learning about new companies, sectors and market trends. This will not only make you a more well-rounded investor, but also help you diversify your portfolio and spot new opportunities.

Get smart: An interesting and rewarding journey

Starting out in investing can feel intimidating, but getting started is the most important step. Now, all that’s left is to stay focused, keep learning, and sharpen your skills along the way.

If you stick with it, I promise you’ll be handsomely rewarded for your efforts.

The writer owns shares of Suntec Reit. He is portfolio manager of The Smart Investor, a website that aims to help people invest smartly by providing investor education, stock commentary and market coverage.