The Biggest Investing Tragedy You Should Avoid

There is one conventional investing advice that has been repeated over the years. It goes something like this: young investors should be willing to take more investing risk, because if things don’t work out – they would still have a lot of time to recover from the mistake. While the advice itself appears to be reasonable, there is a downside to this advice which I would like to talk about today.

The Big Investing Tragedy

Taking some risk is part and parcel in the life of an investor. As investing maestro Peter Lynch once quipped:

In this business if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten. This is not like pure science where you go, “Aha” and you’ve got the answer.

However, there is a possible downside when a young investor takes on too much risk, and falls into heavy losses early in his or her investing journey. In my opinion, the biggest tragedy will happen when that young investor gets discouraged by the losses, and proceeds to stop investing all together.

There is nothing wrong with taking your time

It may not sound fashionable or exciting, but simpler approaches could also help build your confidence as a new investor and help you towards your financial goals. For instance, I have shared recently that how constructing a “boring” income portfolio could be one way to create future dividend cash-flows. In my article on income investing, I shared on how a company like vehicle distributor, Jardine Cycle and Carriage Limited (SGX: C07) was able to grow its dividend-at-cost from 2% to 23.8% over a period of a decade. From this example, we can see that while investing slowly can sometimes be deemed unexciting, the results turn out to be anything but boring.

An income portfolio also has other merits. The growing, future cash-flow of dividends could be used to further fund your future share purchases. This may help further compound your wealth over time.

A Fool’s Take 

In my opinion, it is far more important to build your confidence as an investor over the long term – instead of trying to achieve your financial goals in the shortest amount of time. Investing is not a race where the fastest person wins the game. Beating the SPDR STI ETF (SGX: ES3) – a proxy for the market indicator, the Straits Times Index (SGX: ^STI) – and, inflation rate at the same time offers a big enough challenge for Foolish investors.

The bigger goal to investing is really to consistently stay invested, and taking your time to get there may prove to be more rewarding than trying to sprint to the finish line. If you are able to keep at it, then you stand a chance of avoiding the biggest tragedy – and that is, to stop investing towards your financial goals.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.