As investors, most of us will never be able to accumulate the same abundance of wealth as American billionaire Warren Buffett or banker Wee Cho Yaw.
What is within our reach, however, is a fairly good return on our investments that will enable us to fulfil objectives such as putting our children through college.
The returns will also ensure that we can live out our golden years in relative comfort, without sacrificing the standard of living which we have become used to.
To get there though, we need to make the right investment choices. But it is sometimes difficult to get rid of the emotions that cloud our judgment and trip us up when we invest.
This is understandable.
Making money from the right investment is an exhilarating experience but the pain of losing our hard-earned money on a wrong investment call can last longer.
Take the wild market swings in the past two years, for example.
Investors pulled out billions of dollars from stocks as markets across the globe were paralysed by fear, following Lehman Brothers' collapse in September 2008.
But six months later, they failed to jump back in as stocks staged a spectacular V-shaped recovery, believing - quite wrongly as it turned out - that the world would suffer a severe economic depression on the same scale as that experienced in the 1930s.
Indeed, in the aftermath of the global financial crisis, many people have become so risk-averse that they either park their money in low-yield bank deposits or put their savings in some investment-linked insurance products that guarantee them a small return at the end of five years.
Yet, as any successful investor will attest, the darkest hour is just before dawn.
Any person who bought into depressed blue chips in March last year, when the global financial system appeared to be on the brink of collapse, stood to make a huge killing with the subsequent market rebound.
So ask yourself: Will you be better off in five years' time if you invest some money in the stock market now?
If your answer is yes, then what you should do is find some way to conquer the emotions that cause you to act irrationally in times of great market turbulence.
There are steps which you can take to overcome impulsive investment behaviour.
Recognise the enemy within
Let's recognise that our emotions are likely to be swayed by the constant barrage of television images bombarding us from news networks like CNBC and CNN.
So the first reaction from any trader here to any big overnight plunge on Wall Street is to sell first and ask questions later, even though the reason behind the US stock market turmoil may not have a similar impact on regional markets.
But letting such fears overwhelm you each time there is a major market swing can be costly, as stocks tend to regain part of their losses when other investors take advantage of the irrationality to snap up the battered counters.
In such circumstances, it may be worthwhile for an investor to step away from the TV set or computer, make himself a cup of tea or take a walk, before deciding on his next course of action.
Taking a breather will enable him to think rationally and make better investment decisions.
Use cool-headed logic
Early last year, as alarm bells sounded over the health of ailing financial giants like Citigroup, local lenders such as DBS Group Holdings and OCBC Bank were subject to savage sell-downs as well, even though they were in the pink of financial health.
Around this time, however, a doctor friend of mine, who operated a neighbourhood clinic near an OCBC branch, took the opportunity to buy shares of the bank.
My friend had noticed that it was business as usual at the branch, despite the relentless barrage of gloom and doom then spewing out almost non-stop from the Western financial media.
It is cool-headed investment decisions such as this that net investors their biggest catches when markets turn turbulent.
Finding an investment strategy that works
To resist the temptation of excessive trading - pulling out as the market is collapsing and then getting back in again as the market is hitting a peak - some investment experts have advocated a 'dollar cost averaging' approach.
For such a strategy to work, an investor will have to invest in a fund which tracks a stock market index, rather than an individual stock, to minimise the risks of his investment going up in smoke if a company goes belly-up.
This essentially involves an investor putting a sum of money every month into a fund like the STI exchange traded fund, which invests in a basket of stocks that tracks the Straits Times Index.
With such an investment plan, an investor can stay invested in a basket of Singapore blue chips for decades, and average his investment costs as he does so.
One attraction is that, when share prices fall, an investor will not succumb to the temptation to pull out. Instead, the same monthly sum set aside for investment can be used to buy more shares at lower prices.
And if the Singapore economy continues to prosper in the years to come, he will stand to accumulate a tidy nest egg by taking the emotion out of investing with this approach.
engyeow@sph.com.sg
Opportunity amid the gloom
As any successful investor will attest, the darkest hour is just before dawn. Any person who bought into depressed blue chips in March last year, when the global financial system appeared to be on the brink of collapse, stood to make a huge killing with the subsequent market rebound.
