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What We Can Learn About Investing From Monopoly

monopoly blue properties

Monopoly has been a popular game for almost a century and there are good reasons for it. In my opinion, it is one of the best games for teaching our children – and maybe even ourselves – about finance and investing.

Have Cash on Hand

In Monopoly, players who are focused on buying up expensive plots of land tend to not do well in the game. This is because they end up tying-up too much cash in the pricey properties, which restricts their cash flow during the game. So, that’s an important lesson: We should always have enough cash on hand.

This is true in both Monopoly as well as for a company.

A company with a strong balance sheet and enough cash on hand might be a more attractive investment than one struggling that’s bloated with debt and struggling with its cash flow and. For example, casino and resort operator Genting Singapore (SGX: G13), in its latest quarterly report, had about S$ 3.9billion in cash and cash-equivalents but only S$ 2.3billion worth of debt. Having a net cash position of S$1.6 billion gives the company two things: 1) flexibility if it needs to invest in other potential projects, and 2) a buffer if its business becomes weaker in the short term.

Wealth Creation Takes Time

Monopoly is not a game of speed; it can take up to 4 hours of play on average to complete one game.

So, it is definitely not a game for the impatient, as is investing. Investing can only work if enough time is given for compounding to work its magic. In fact, it is my opinion that we should see investing as a lifelong pursuit.

If you are just starting out in your career, you probably still have another 50 years ahead of you to invest. My fellow contributor, Chong Ser Jing, has shown in his article that an investor who had invested in blue chips like Jardine Cycle and Carriage (SGX: C07), United Overseas Bank (SGX: U11), and Singapore Press Holdings (SGX: T39) for the past 20 years or so had gains of roughly 10 times their initial investment.

If those historical returns can be continued in the future, either through the same shares or from others, imagine what you can achieve if you have another 50 years.

Foolish Bottom Line

Investing is both an art and a science. There is never a formula to successful investing. What is important is the mind-set toward investing that we have.

If we have the right attitude, we will realise that there is so much to learn about investing and those lessons can even come from the strangest of places, such as a humble board game called Monopoly.

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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 contributor Stanley Lim doesn’t own shares in any companies mentioned.