Before I write my own personal list, heres someone elses I came across on another board:
Sharky
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MARKET COMMENT
Investing Lessons of 2001
By Bruce Jackson (TMFGoogly)
December 27, 2001
It has been another tough year for stock market investors. The latest results of the poll linked to my article of Christmas Eve titled "Top Tips To Improve Your Investment Returns" indicates that 72% of voter's portfolios fell in 2001. Yikes! Here are some of the painful lessons we all leant in 2001.
1. Shares can fall 2 years in succession.
They've done it before and they will do it again. Many people, especially those who are relatively new to stock market investing and have been brought up on nothing but bull markets, thought that 2001 would be an up year for shares. Why they got that impression I'll never know. It's probably just a result of following the crowd. Although I haven't got the facts to hand, I'm guessing most pundits would also have predicted an up year for the market in 2001. How wrong they all were.
2. Technology shares can fall even further.
Many people thought the tech carnage would cease on December 31 2000. They were very wrong. Take a look at this table.
Company Name Loss in 2000 Loss in 2001
Marconi (LSE: MONI) 34% 95%
Colt Telecom (LSE: CTM) 55% 93%
Psion (LSE: PON) 47% 70%
Cable & Wireless (LSE: CW.) 14% 64%
ARM Holdings (LSE: ARM) 39% 33%
FTSE 100 index 10% 17%
Just because the above companies have fallen significantly for the past two years in a row doesn't mean they can't fall again in 2002. I'm not predicting they'll move one way of the other, but you should at least learn your lesson. There are no certainties in investing. You can put the odds in your favour, by doing things like buying cheap shares, and investing in companies with little or no debt, but nothing is guaranteed.
3. Fallen stars can bounce back.
The following table says it all.
Company Name Gain in 2001
Arcadia (LSE: AG.) 218%
Marks & Spencer (LSE: MKS) 94%
PizzaExpress (LSE: PIZ) 37%
Rentokil Initial (LSE: RTO) 21%
FTSE 100 index 17%
A dog can have its day - again. But beware! Not every dog bounces back. I refer you to the sorry table of technology companies above. Want one more sad case? Baltimore (LSE: BLM) is down 96% in 2001. Not nice.
4. There are no certainties in the stock market.
Need I say more than Independent Insurance and Railtrack? I now posses a useless share certificate in the former company. This point could also be headed "When it looks too good to be true, it usually is". Independent Insurance's reported profits were head and shoulders above industry standards. That's because those profits were illusionary, too good to be true. I should have known better. I will next time.
5. Debt can be very bad for your wealth.
The number of companies who are struggling under massive debt burdens is astounding. The simple lesson - avoid them.
6. The dividend is not dead.
With the market falling, those dividend cheques at least help ease part of the pain. But there's more to dividends than just the cheques. They can help put a floor under a company's share price. In the face of falling profits, companies are generally loathe to cut their dividend unless they really are in trouble. There are plenty of quite respectable companies out there who have little debt and dividend yields of 4% or greater who deserve your attention.
Conclusion
These are the main lessons of 2001. However, the lessons are generic, and can and should be applied to any year. Experience, discipline and patience are the keys to long term investing success.
The author holds shares in PizzaExpress. He is going to frame his useless Independent Insurance certificates as a permanent reminder of how stupid and gullible he was. Lesson leant!
