2 Key Investing Lessons for 2015

The current year is winding down.

It may be a good time to reflect on the happenings in the world of finance in 2015 and pick out lessons that we can take away from it. There have been a few notable events this year, like the fall in oil prices and the depreciation of the Chinese yuan. Coming to home, Singapore’s market barometer, the Straits Times Index (SGX: ^STI), is currently 16% lower compared to the end of 2014.

Here are two lessons that we can learn from all these:

1. The oil and gas massacreclick here

2. The value of accumulated knowledge

One of the advantages of being a long term investor is the accumulated knowledge that can be gleaned from following a business.

When we hold a company’s shares for the long-term, we will be following its business developments over time. If we do, we may find that we will attain a level of knowledge that will help us make better decisions.

Like oil prices, it’s been a harrowing year for Sarine Technologies Limited (SGX: U77). Shares of the diamond manufacturing systems maker have almost halved since the start of 2015.

There were industry developments that have hampered the company’s performance this year. Price differentials between rough and polished diamonds have been at unsustainable levels for the majority of the year. This, in turn, has affected the profitability of diamond manufacturers which happen to be Sarine Technologies’ customers. And if its customers are not able to afford its services, Sarine Technologies suffers.

But, we have also learnt that Sarine Technologies’ business has bounced back from difficulties in the past. For an investor interested in the company, all the considerations above should be factored into his or her decision making process before any investment is made.

Foolish takeaway

Learning lessons helps us improve our investment process.

In my view, a good investment process involves thinking about the potential upside as well as potential downside of a company. In the case above, the oil and gas massacre helps us think through the potential downsides of a cyclical industry. As for the example of Sarine Technologies, it is a good instance of how we can use accumulated long-term knowledge.

Picking up lessons like these helps us sharpen our investment thought-process and hopefully, become better investors.

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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.