25 Surprising And Important Things About Investing Every Investor Should Know

Credit: Simon Cunningham

Back in July, I had shared 24 surprising and important things about the investing world that I think every investor should know of.

These things come from my years of learning about the financial markets. Earlier today, a new factoid floated up in my mind. So, here’s the 25th entry in my evolving list of surprising and important things about investing:

25. In a 140 year period when US stocks have risen by 1,000,000%, there have been periods of over 10 years when stocks there have given 0% returns.

My US colleague Morgan Housel once showed in an article how the US stock market has done over the past 140 years (that is, since the 1870s) after accounting for dividends and inflation. The number is staggering: the S&P 500 had increased by 10,000-fold, or 1,000,000%.

But what’s even more intriguing about that mind-boggling return is the time periods when US stocks have given 0% returns. Here’s a chart by Morgan on the matter that’s presented in a separate article:

Morgan Housel chart for periods with 0% market returns
Source: Morgan Housel,

This is how Morgan described the data:

“There are about a dozen separate episodes over the last 130 years when the market sat lower than it was three years prior.

The 13 years ending in May 2013 was the longest such stretch. If you survived this period with your head on straight, congratulations — it was, statistically, the most frustrating period in market history. Even during the Great Depression, when the market was down almost 90% at one point, we saw new highs after about seven years (adjusted for dividends and inflation).”

This is remarkable for me. If you had learnt that US stocks had gained 1,000,000% over the last 140 years, it’s easy to think that stocks there would have given investors an easy time, all the time. But that has clearly not been the case. The US stock market has also given its investors years (emphasis on the plural) when they would have felt like tearing their hair out.

In Singapore’s stock market, there have also been similar instances. Tourism asset owner Straco Corporation Ltd (SGX: S85) is a good example. The company’s shares have generated total returns of 252% (including gains from reinvested dividends) since their listing in 2004, making Straco a decent long-term winner. But, as you can see from the chart below, Straco’s shares spent years languishing, before making a leap in 2012.

Straco's dividend-adjusted share price from Februray 2004 to today
Source: S&P Global Market Intelligence

Morgan’s data highlights something important for investors to know: Investing is a real long-term endeavour. You’d have to suffer years of frustration at times in order to enjoy the eventual gains.

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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 Straco Corporation.