Choosing shares - what do I believe in?

This is the question I always ask when I meet a like-minded investor.

When my friends ask me what shares to buy, I ask them the same question, what do you believe in?

The principle behind this simple question will determine how you approach choosing the "right" share for you. As strangely as it sounds, there are shares that are more "right" for you, than your neighbour, although the shares' performance are independent of the buyer.

Long-term partnership
The share you choose will remind you of its existence every day, for as long as you keep it, through the monthly statements sent to you from the central depository. It will show you how much it is worth based on the last done price for the month, and at the end of every year, an accumulated dividend payment statement. Choosing the "right" share will mean that you will likely be in a better position to perform your yearly assessment whether to keep or sell or buy more. In bad times, you also need to know the fundamentals of the share well to know whether the share's future's performance will be better or worse. Treat this as a long-term partnership, and know your shares like how you would approach choosing your partners. I choose the companies that interests me or that I would consider working for given the chance.

Short vs long-term goals
Know your short, long, and longer term goals, and always review them yearly. I have my yearly reviews at the end of the year when everyone starts reminding me about "new year resolutions". My goals had changed over the years. Ten years ago, my short term goal was to concentrate at building my honey pot, so I buy and sell shares whenever the sell price is more than my buy price by 20%, if the time gap is less than 2 years. The reason behind that "formula" as that I will get to "cash in" on the dividends 2-3 years in advance, and channel the money into another share for growth. My long term goal then was to buy a fat bucket of blue chips after I save up my honey pot. I had since filled my honey pot and am filling my bucket (not fat yet) with blue chips and that "fattening" has become my long term goal. My immediate action plan to fatten my bucket is to choose asset-rich companies with high capital appreciation growth -- prime real estate and specialised skills trade. My short term goal now is to invest in Real Estate Investment Trusts (REITs) to secure an income stream early to benefit from the effects of compounding.

If you can get through these two points, you are on your way to a great start every new year!