10 Useful Investment Tips from a Less-Known Investing Guru

Hedge fund manager Seth Klarman may not be a well-known name.

His results, though, have been mightily impressive. As the founder and president of Baupost Group, a hedge fund company with assets of US$28.5 billion (as of March 2015), he has delivered compound annual returns of close to 20% since 1992.

Given Klarman’s accomplishments, there would be useful investing lessons to learn from him. Here are ten investing tips which have caught my eye.

Investment Tip No. 1 and 2 – click here

Investment Tip No. 3 and 4 – click here

Investment Tip No. 5 and 6 – click here

Investment Tip No. 7 and 8 – click here

Investment Tip No. 9:

“The daily blips of the market are, in fact, noise—noise that is very difficult for most investors to tune out.”

Day-to-day volatility in the stock market can be considered to be a normal part of the life of an investor.

Take a look at the graph below from my fellow Fool Chong Ser Jing. It shows the number of days in each calendar year from 1988 to 2014 in which the Straits Times Index (SGX: ^STI) had gained or lost 1% or more:

Chart of Straits Times Index's volatility

Source: S&P Capital IQ

Judging from the graph above, the daily blips that Klarman refers to is common. While it is hard to tune out the noise, as Klarman mentioned, we still have the choice of doing so to focus on the long-term prospects of the business behind a stock ticker.

Investment Tip No. 10:

“Never stop reading. History doesn’t repeat, but it does rhyme”

While what has happened in the past may not always repeat itself identically, there will still be similarities as events unfold.

Between 1993 and 2014, there were nine years in which Singapore’s stock market – as represented by the Straits Times Index – had tumbled more than 20% from peak to trough. This is summarized in the graph below:

Maximum drawdown for Straits Times Index, 1993 - 2014

Source: S&P Capital IQ

Said another way, stocks can fall significantly from time to time. Each fall may be for a different reason, but history informs us that it happens often enough.

For those who find the prospect of a 20% decline in their portfolio daunting, one consideration would be to hold some cash as part of their portfolio. Cash, in this case, may help one keep calm during times of stress in the stock market.   

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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.