Emotions in long term investing: First Reit case study

by | Nov 23, 2018 | Reits | 0 comments

One of the challenge with long term investing is that you should hold your position even when the price is dropping, provided that the fundamentals are still good. Why is it challenging? Because you may suffer huge unrealized loss, and this may prove to be emotionally hard to deal with.

Let’s take as example First Reit, a fundamentally stong Reit in the healthcare sector listed in the Singapore stock exchange. Probably due to a downgrade of its main sponsor, the price dropped a lot, from around 1.2 SGD (Singapore Dollars) at the beginning of November to a low of 0.92 SGD around three weeks later. This means a drop of more than 20%.

First Reit drop

Picture taken from ChartNexus

After that, the price bounced back. This could be an opportunity to buy, depending on your strategy. In any case, the mistake to avoid is to panick and do things that are not part of your strategy. For example, if you decided to sell (yes, I used the past because you should decide your exit strategy even before entering the position) only for fundamental reasons, you should not sell out of fear because the price is dropping. Keep this in mind!