Here’s What to do After a 5-Year Market Rally

It has been a rewarding market rally for the past five plus years. During the Great Financial Crisis, the SPDR STI ETF (SGX:ES3), a proxy to the market barometer Straits Times Index (SGX:^STI) hit an intraday bottom of $1.49 in March 2009. Since then, the SPDR STI ETF has rallied more than 119% in share price alone up till the close on 29 October 2014.

For this bountiful period, the SPDR STI ETF clocked in an annual return of 14.9% per year. Foolish investors will note that this five-year stretch of outperformance is unusually generous. After all, since its inception in April 2002, the annual compounded returns for the SPDR STI ETF has been relatively lower at 8.4% (including dividends reinvested).

So, with that in mind, what should Foolish investors do next to keep up their investing returns?

Cues from investing masters

To help us in figuring out what to do next, we can look for cues from successful investors like billionaire investor Charlie Munger – Warren Buffett’s right hand man. Munger had this to say about how Buffett kept up his level of performance:

Warren is one of the best learning machines on this earth. The turtles who outrun the hares are learning machines. If you stop learning in this world, the world rushes right by you. Warren was lucky that he could still learn effectively and build his skills, even after he reached retirement age. Warren’s investing skills have markedly increased since he turned 65. Having watched the whole process with Warren, I can report that if he had stopped with what he knew at earlier points, the record would be a pale shadow of what it is.”

Suffice to say, it would have been very easy for Buffett to coast to his retirement at the age of 65. Instead, as Munger noted, Buffett’s investing skills notably improved from his retirement age. The increase in investing skills has lead to much of Buffett’s returns to come in his later part of life. As my US colleague Morgan Housel notes:

Of Warren Buffett’s current $60 billion net worth, $59.3 billion came after his 50th birthday, and $57 billion came after his 60th.

The trait of lifelong learning tends run alongside many other successful long term investors. In the case of Dato’ Cheah Cheng Chye, the Chairman of the largest asset management firm in Asia, he went as far as to change his signature to one single word:


It is in his deep passion for learning that has lead his Value Partners Classic Fund to deliver a compounded annualized return of 17% over 21 years.

Foolish take away

It goes to show that Foolish investors might want to avoid being complacent over the generous performance of the past five years, and instead, be ready to put on our learning hats for life. If one of the most successful investors of our generation (Buffett) is still learning at the age of 65, we should have little excuse not to do so ourselves. For more on investing, sign up for a FREE subscription to The Motley Fool’s weekly investing newsletter, Take Stock SingaporeIt will teach you how you can GROW your wealth in the years ahead.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.