“The biggest investing lesson I’ve learned in 2023 has been…”

‘Time in the market, not timing the market’ is a mantra we repeat here at The Motley Fool. And, more than just compounding, time also gives us the opportunity to learn and become better investors for it!

Hold steady

By Dr James Fox. In 2023, I’ve learned a crucial investing lesson: patience is key when investing in markets suffering from negative investor sentiment. In other words, don’t expect quick wins. 

This year, I made investments in companies, primarily on the FTSE 100, whose valuations seemed too low to ignore. 

While some of them came good almost immediately, like HSBC, others like Barclays and Hargreaves Lansdown carried on falling. The stocks I believed couldn’t possibly decline further did just that.

Essentially, I was reminded that the market doesn’t always share my optimism and it can take a long time for sentiment to improve. 

It’s easy to get discouraged when faced with declining portfolios, but this experience reaffirmed the importance of a long-term perspective. 

Poor investor sentiment can take time to shift. It’s a reminder that market timing is a gamble, and value investing isn’t always instantly rewarded.

It’s also a reminder that sustainable gains come to those who endure the turbulence, stay true to their investment theses, and trust in the fundamental value of their holdings. 

In these moments of uncertainty, the best strategy is often to hold steady and wait for the market to recognise the true potential of undervalued assets.

James Fox has positions in Barclays and Hargreaves Lansdown.

Establish fair value

By Christopher Ruane. One lesson I learned anew this year was the importance of not overpaying for a stock no matter how good the business seems.

It can be tempting to look at a company like Apple or Alphabet (both shares I have owned at some point) and think that, even if the valuation seems too high, such strong businesses ought to grow into it over time.

But sometimes, external events mean that that cannot happen.

Take Dechra Pharmaceuticals as an example. I had long liked the business – but not the valuation.

I was not alone in thinking Dechra was attractive. In the summer, the then-listed company agreed to a takeover.

The purchase price was well above the recent share price. However, if I had bought the shares back in 2021 I could have made a loss of around 25% when selling them during the takeover. In such a situation, there is effectively no alternative to selling.

This was a good reminder for me that, no matter how strong I think a company’s long-term commercial outlook may be, I ought never to pay more for its shares than I think they are worth today.

Christopher Ruane does not own any of the shares mentioned.

Consider external factors

By Zaven Boyrazian. As a long-term investor, macroeconomics hasn’t played a significant role in my investing strategy. After all, a high-quality business will almost always be able to adapt to a shifting landscape. But this transition can be complicated. And that’s certainly proven to be the case with a few companies from my portfolio.

Warehouse REIT (LSE:WHR) is one such example. While I remain optimistic about the long-term potential of this e-commerce warehouse operator, the balance sheet is under some notable strain. Interest rate hikes have significantly increased its cost of debt. And I underestimated how burdensome its loan book would become.

Management has outlined and begun executing its plan to resolve its leverage issues, which seems to be doing the trick. However, my over-eagerness to invest in discounted real estate assets has yet to deliver a positive return. And it may take some time before both the share price and dividend start moving back up.

The mistake I made was failing to factor in the impact of potential future interest rate hikes when determining a margin of safety. With inflation significantly down since the start of the year, interest rates have seemingly stabilised. But as the economic outlook improves, rate cuts might soon be on the horizon. And that could spell terrific news for both growth and income stocks.

Zaven Boyrazian owns shares in Warehouse REIT

Take action

By Alan Oscroft. My biggest investing lesson in 2023? It’s tricky. I’ve been reminded of lots, but they’re all ones I really knew already.

I’ve mostly thought about how this year has stressed the importance of ignoring share prices and looking only to the only term.

But there’s one I need to be better at. I need to be more decisive. I’ve always been weak at that, and I’ve thought about it for years.

But it really sunk in this year, as I’ve looked back at the stocks that I really knew were good… but didn’t buy.

I’ve missed some good ones in 2023.

I think the older I get, the more I tend to over-analyse things. We really do need to look at the ups and downs of any individual stock, yes.

But it’s surely best not to get so hung up on picking and scratching over both sides that I never get round to actually making a decision.

Still, I haven’t had a lot of spare cash to invest in 2023, so I haven’t missed out on too much.

But for 2024? Yes, act decisively, buy what I know is good, and stop waffling and prevaricating.