Investing / Self-improvement
Three Investing Lessons that can be Applied in Everyday Life
Reflections on life and investing
Over the last 10 years, I have been fascinated by investing. I have learnt a huge amount from investing small amounts myself and from numerous articles, books and conversations with friends and family. While I am a better investor than I once was (although I have so much more to learn), I have recently realised that many lessons I have learnt don’t apply just to investing but have been valuable life lessons too.
Lesson 1 — Luck & Skill
I have made some terrible mistakes when investing and I have also made some investments which have turned out well. I have found that it is oh-so-easy to attribute a successful investment to your individual brilliance as a stock picker — ‘I saw this trend before anyone else’. On the flipside, when an investment goes wrong, it is of course mostly to do with bad luck — ‘Who could have predicted that?’.
In investing, as in life, I have reflected that disentangling the extent to which outcomes are due to luck or skill is an almost impossible task. Inevitably, it is nearly always a combination of the two. So, I try (and often fail) to constantly remind myself to be humble when things are going right and to be self-compassionate when they are going wrong.
Lesson 2 — Focus on what you can control
In investing, a large part of your investment performance is outside your control — my own view is that there is a larger element of luck than most investors care to admit. In investing and in life, I try to keep in mind the Prayer of Serenity:
God, grant me the serenity to accept the things I cannot change,
courage to change the things I can,
and wisdom to know the difference
You can’t control what the stock market or your pet crypto does, but you do have more control over something which will probably have much more effect on your wealth in the long term than any excess returns generated from your portfolio: your savings rate.
Lesson 3 — the Power of Compounding
One of the things I have regularly underestimated, in investing and in life, is the power of compounding. It is, after all, the 8th wonder of the world according to Albert Einstein. Most times I have tried to ‘time the market’ rather than patiently letting compounding work its magic, I have ended up worse off. This same approach applies in life too — the fantastic book ‘Atomic Habits’ (which I would highly recommend) does a great job of illustrating how small, incremental changes can have a huge effect over the long term.
Saying all of this, of course, it is easy — it is the doing that is the hard bit!
