The insane rally in the US is making investors all over the world rethink their strategies. On average, investors in the US market should be yielding around 23-35% which is frankly way more than most markets by a long shot. That is no surprise since the US government is able to print an infinite amount of money by increasing its debt ceiling repeatedly. That said, there must be a price to pay for such good market performance but no one knows when will investors be “billed.” Since the US market is already at all-time highs and performing way better than pre-pandemic times, it would be silly to buy into US stocks for continued growth. If anything, I think when the music stops, many investors will not know what to do with their holdings and the rest of them will accumulate more at a higher price assuming the feds will print more to push asset prices higher again. Instead, if anyone is still looking to divest their US holding or for legitimate long-term investments, they should be looking elsewhere. Therefore, we will try to study more about the psychology of investing and how would investors think to make a good long-term investment decision.

You are patiently waiting for a lower entry to accumulate

The most essential ingredient for long-term investment is the willingness to put a large amount of your capital (in absolute terms) into it. Say, for example, assuming that you invested 10k in Company A and made 40% in the past few years, while that might give u a return of over $4000, it will still pale in comparison if another person is willing to invest 50k and make a 30% return over the same period of time. Hence the real differentiator is not always the yield of your returns but rather the amount of money that you are willing to invest in a particular company. US market aside, you are looking to invest in a quality company listed in SGX, it will probably never yield 40% returns over a few years but you might be more comfortable investing more of your capital into the stock, which in turn allows you to still get decent returns. On the other hand, investing in an overheated and overbought market like the US does not inspire confidence in investors therefore, more investors are only willing to put in smaller amounts which causes their absolute returns to be way less than any an SG stock investor.

Company’s performance is good and can be better in the future

When picking a company for long-term investments, that company has to have plans to further its business and earn more revenue and profits over time. This will ensure that dividends paid out is not only sustainable but might also increase over time. Such foresight is hard to come by and it will usually lead to a lot of self-doubts because the company might go through a long period of consolidation before the actual payday comes. Looking at the example below, you will realize that SGX had many years old price stability before surging for the past 2 years.

SGX is a good company to demonstrate what is considered a good investment as it fulfills the following conditions

• Willingness to buy more over long periods of time
• Appropriate amounts of dividends are paid back to investors
• The company continues have potential for growth in revenue and profits

The company is currently not in the limelight

Any company in the limelight especially when it appears on prominently news channels are probably already fully priced in and overhyped. As such, we should try our best to look at companies that are not on the new’s radar because positive sentiments will usually lead to a surge in share price beyond the actual growth of the company. For example, if the company’s net profit rose 25% YoY, its share price should not increase by 100% for instance. That is why we should always stay away from those companies that are already overpriced and instead go for companies with unrealized potential and growth.

Closing thoughts

Investing is a lot more than getting high yields because many investors are apprehensive of the growth in share price when the actual growth of the company is not proportional. Therefore, we should always look for companies that reflect the actual growth of the company. I understand in recent years, many things that happen in the market no longer make sense. With the introduction of sustainable investing, it is difficult to price these investments when we do not really know the future and profitability of such companies. I hope that through this post, more people will realize that they shouldn’t overly focus on yields but also the willingness of investing more of their capital over time.