23 Surprising And Important Things About Investing Every Investor Should Know

A month ago, I had shared 22 surprising and important things about investing that I think every investor should know.

These information come from the years that I’ve spent learning about investing (over 10 years now) and commenting about it with my job at The Motley Fool Singapore (more than three years and counting!).

As I was having lunch a few hours ago, another fact had bubbled into my head. So, let’s have a look at the 23rd entry of my ever-expanding list of surprising and important things about the weird and quirky world of finance:

23. One of Warren Buffett’s greatest ever long-term investments looked like a complete loser for the first few years

In 1973, Buffett started buying shares of the Washington Post company (now known as Graham Holdings Company). He ended up spending around US$11 million in total by the time he stopped buying.

By the end of 2007, his stake in the Post had grown to US$1.4 billion. For those not counting, that’s a gain of more than 10,000%. And to put it simply, the Washington Post was a smashingly successful long-term investment for Buffett.

But here’s the kicker: The Washington Post’s stock fell by 20% after Buffett had bought and stayed there for three years. With the power of hindsight, that 20% paper-loss Buffett had initially suffered on the Post’s stock looked trivial. But back in the day, there must have been some investors who thought Buffett had just grabbed himself an absolute loser.

I have two big takeaways from this episode.

First, we don’t need to time the market to invest well – what’s far more important is buying a stock for lower than what we think its businesses are worth. In his 1985 Berkshire Hathaway shareholder’s letter, Buffett commented that the Post had an intrinsic worth of US$400 to US$500 million in mid-1973 and yet had a market capitalisation of just US$100 million.

Second, even the best long-term investments can be painful short-term losers.

In Singapore, healthcare services provider Raffles Medical Group Ltd (SGX: BSL) is a wonderful example. At the start of 2008, just before the Great Financial Crisis really picked up steam, the company’s shares were trading at S$0.50 each. But, Raffles Medical’s share price had hit a low of less than S$0.20 barely a year later on November 2008, representing a massive decline of more than 60%.

Yet, as a result of the company’s growing earnings (Raffles Medical had a profit of S$31.5 million in 2008 and S$69.3 million in 2015), its shares are exchanging hands at S$1.515 each today, some 201% higher than at the start of 2008.

While not every company can see their share prices recover after falling, don’t be put off by short-term losses when investing. Keep an eye on the field (the business’s performance) and the scoreboard will take care of itself.

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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 owns shares in Berkshire Hathaway and Raffles Medical Group.