Unless you need your money back soon, you should think long term and avoid getting caught up in the daily noise of markets. This is for two reasons. First, it makes sense to align your own investment time horizon with that of the companies in which you invest. You’ll find that all good companies – and even some bad ones – have a long-term perspective. If a company builds a factory, for example, it expects to generate returns from it for at least ten years, as you should from its shares. The second reason is that short-term price movements are mostly inconsequential as they are largely about temporary loss (and gain) of capital. What you should be worried about is permanent loss of capital and this is all about assessing a company’s long-term business prospects.
Hugh Young is managing director at Aberdeen Asset Management Asia.