The Very Hungry Investor

It is amazing how much we can learn about life and investing from young children’s books.

As a father, my daily routine includes a night-time book-reading session with my kids before they sleep. One of their favourite books is The Very Hungry Caterpillar by Eric Carle.

For those who are unfamiliar with the story, it is the tale of a caterpillar that was eating all kinds of food. With each passing day, the caterpillar consumed more and more food, until one fateful day when it simply ate too much and suffered a tummy upset as a result. The pain troubled the caterpillar for a long time and subsided only when the caterpillar finally found the right food for itself – leaves. With the caterpillar feeling much better, it was able to rest and finally became a butterfly.

There are many parallels we can draw between the caterpillar and new investors.

When new investors start out, they’re ‘hungry’ to invest and will want to try out all kinds of different ways to work their capital. Everything’s on the table – hot tips from friends or brokerages, options trading, currency trading, unauthorized investment schemes. Anything and everything, really. But that is also the time when many new investors will suffer ‘indigestion’ and ‘stomachaches’ like the caterpillar.

In order to prevent debilitating pain, it may be important for new investors to keep their investing capital tiny in that phase. Only invest what you can afford to lose.

The Very Hungry Caterpillar had a happy ending. The caterpillar eventually found what’s right for him and underwent a metamorphosis into a butterfly. Some investors may never do, but there will be those who do find what’s right for them.

At The Motley Fool Singapore, our purpose is to help the world invest better. To draw an analogy with my kids’ favourite caterpillar tale, we hope that we can be the cocoon where you stop to morph into a beautiful butterfly.

As a first step, you can pop by The Motley Fool Singapore's free weekly investing newsletter, Take Stock Singapore. The newsletter also comes with a free special report that we've prepared to help investors find out what's the right 'leaf' for them. Sign up here!

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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 writer Stanley Lim does not own any companies mentioned above.