The Motley Fool

6 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). I still hold those units today and thankfully, the REIT has been a very satisfying 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 six 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” – click here

Lesson No. 6: Investing is psychological

Sir Isaac Newton is often regarded as one of the most influential scientists of all time. He’s an intellectual giant. But, all of Newton’s brain power could not save him from losing a big bundle in the infamous South Sea Company stock market bubble in the 18th century.

One reason for the failure could be human psychology. The theories behind investing (such as finding good investments or calculating a stock’s value) may be learnt through studious reading. But the psychological aspects of it is a tougher topic to pick up. Real world practice is needed.

There are a variety of psychological biases that may affect the way we invest.

There’s confirmation bias, for instance. Under its spell, we may seek information that only agrees with our investment thesis. That can be dangerous as we may remain blind to the risks involved.

There is also the anchoring bias. Anchoring often happens when we make investment decisions which take into account the stock price that we paid before. Logically, what we paid for the shares of a company before should not matter as much as the current state of the underlying business.

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 a “too hard” pile often as well.

When I invest, I will also try my best to be aware of any possible psychological biases which may creep into my decision making.

Overall, what I’ve described above is 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.