5 Key Lessons from a Decade of Investing

I am fast closing in on the 10th anniversary of my first ever purchase of a Singapore stock.

Back in 20 October 2005, I made my maiden investment and bought some units of retail and commercial real estate owner Suntec Real Estate Investment Trust (SGX: T82U), which luckily enough, has been a good long-term investment.

My portfolio has come a long way since then. In my decade of investing, I have picked up my fair share of winners and losers. There are learning points to be found in both.

Here’re five key lessons I’ve picked up from my investing journey so far:

Lesson No. 1: The value of simplicity – click here

Lesson No. 2: The power of long term investing – click here

Lesson No. 3: Find your investing home – click here

Lesson No. 4: Being Motley – click here

Lesson No. 5: Know when it is “too hard”

Warren Buffett is a well-known name in investing. In his fifty years at the helm of Berkshire Hathaway so far, he has managed to compound its book value per share (a good proxy for the economic value of the firm) by 19.4% per year.

Much has been written about his long term investments in powerful brands such as Coca Cola and American Express. Less, though, is written about how he actually narrows the investing field to the few investment choices that he makes.

In pruning the universe of stocks, Buffett uses what he calls a “too hard” pile, a place he tosses most of the ideas he comes across. These are ideas which the Oracle of Omaha considers to be either too difficult or outside his circle of competence. This is what Buffett’s sidekick, Charlie Munger (who’s every bit as good an investor as Buffett is), once said about the “too hard” pile.

“We put almost all in the “too hard” pile and sift through a few easy ones.”

In short, both Buffett and Munger are hardly shy (despite their illustrious reputation) in using the “too hard” pile whenever possible. By avoiding the difficult ideas, they reason that what’s left would be the easier – and profitable – ideas that they can pick up.

If you want to know what’s right for your portfolio, you may want to start by keeping out what’s wrong for your portfolio.

A Fool’s take

There are many ways to approach investing.

My preference is towards long-term investing in growth companies with a simple investing thesis. But at the same time, I also remind myself to constantly be flexible in my thinking and not be too dogmatic. I use the “too hard” pile often as well.

It’s an investing approach which fits my lifestyle as I do not have to tend to my companies on a daily basis. If the business keeps purring, I can enjoy a good night’s sleep and spend time on other important things in life.

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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 owns shares in Suntec REIT and Berkshire Hathaway.