13 Surprising Things About Investing Every Investor Should Know

I had recently shared 10 surprising things about the investing world that I think every investor should know. They come from my experience over the past three-plus years as a writer and analyst with The Motley Fool Singapore and over the past decade and more as a keen student of investing.

Over the past few days, more surprising things had jumped into my mind. Here are the 11th, 12th, and 13th:

11. Investors can have horrible performances even when they have bought fantastic investment funds.

In the decade ended 2009, Ken Heebner’s CGM Focus Fund in the U.S. had earned a mightily impressive annual return of 18%. Sadly, its investors had lost 11% per year on average. The problem here is that investors in the fund had piled in when it was doing well but sold when it hit some turbulence.

Even great-performing funds can’t help an investor if he or she has poor investing behaviour.

12. Even the best investment managers can have very rocky short-term patches too.

Charlie Munger’s a phenomenal investor. From 1962 to 1975, Munger had ran his own investment fund, investing mainly in the U.S stock market. In those 13 years, he managed to generate an annualised return of 19.8%, representing a total return of 1,157%. For context, the U.S. stock market had gained just 5.0% per year, or a total of merely 96.8%, in the same timeframe.

But, take a look at Munger’s track record on a year-by-year basis:

Year Charlie Munger’s partnership performance
1962 30.1%
1963 71.7%
1964 49.7%
1965 8.4%
1966 12.4%
1967 56.2%
1968 40.4%
1969 28.3%
1970 -0.1%
1971 25.4%
1972 8.3%
1973 -31.9%
1974 -31.5%
1975 73.2%

Source: Article titled “Superinvestors of Graham and Doddsville

Notice the years 1973 and 1974 when Munger lost big by over 30% each? That’s a startling rocky patch, but even those years couldn’t dent Munger’s fantastic overall achievement. His experience is a reminder that stocks don’t go up in a straight line. So, be prepared for short-term volatility in the market when you invest – it’s part and parcel of investing.

13. There are many stocks that fall and don’t come back.

One of the last big crises that engulfed Singapore’s stock market was the Great Financial Crisis of 2007/09. In that period, the market barometer, the Straits Times Index (SGX: ^STI), had reached a trough of 1,455 points on 10 March 2009 after plunging by over 60% from its pre-crisis peak.

The crisis was a great time to invest as the index closed yesterday at 2,824, some 94% higher than the low it reached during the financial crisis. But, of the 566 stocks in Singapore’s stock market that was already listed back in 10 March 2009 and that I have data on currently, 165 closed yesterday at a price at least 30% lower than where they were on 10 March 2009.

Put another way, roughly one-third of my universe of stocks had failed to rebound from the financial crisis even when the market as a whole had recovered strongly. This applies even to current and ex blue chip stocks (stocks which are part of the Straits Times Index) such as Noble Group Limited (SGX: N21) and Cosco Corporation (Singapore) Limited (SGX: F83).

Company Price decline: 10 March 2009 to 7 March 2016
Noble -32%
Cosco -45%

Source: S&P Global Market Intelligence

When stocks fall hard, it may appear to be a good time for bargain hunting. But, it’s crucial to note that not every stock that falls is an investing opportunity. There are many stocks that fall and don’t rebound.

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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 writer Chong Ser Jing doesn't own shares in any companies mentioned.