Investing Can Be Fun – It’s Like Playing With Lego Bricks

Do you know that letting your kids play with Lego Bricks now may improve their investment skills in the future? I remember spending countless hours with my Lego Bricks when I was young. Of course, being a child back then, I would have never realized that building bridges and trucks with the bricks would teach me to become a better investor.

But, there is plenty about investing that we can learn from playing with Lego Bricks.

Brick by brick

When we are reading a company’s materials and trying to piece together information from different sources, it is akin to building a Lego castle brick by brick.

Every single piece of information we obtain about a company may not make sense at the beginning or on its own. But as we learn more about the business, a clearer image starts forming through the fog.

This is just like playing with Lego. When we are laying one brick at a time, it is hard to imagine how the final castle might look like. Only if we are patient enough to lay brick after brick can we form a full castle.

We can see how this works with Singapore Exchange Limited (SGX: S68) as an example.

The first brick

If you are looking at Singapore Exchange for the first time, you might assume that the company is merely running a stock exchange for listed companies in Singapore.

More bricks

But as you dig deeper into Singapore Exchange, you will realise that it has a huge derivatives business as well, which is not correlated to its securities business.

And when you look at the past history of Singapore Exchange, you will find out that it has grown both its revenue and profit by 11% annually over the past 15 years. That is a very strong track record.

Completing the castle

Unfortunately, unlike with Lego castles, an investor can never finish constructing the ‘image’ of a company.

This is because there is no end to how much you can know about a business. There are always aspects of a business that we can never know for sure. For instance, we will never know with certainty how the future of a company will look like and how the landscape of its industry will change.

Luckily, we would not need the full picture of a company to make smart investment decisions. As long as we have a fairly good image of a company, we can then make intelligent investment decisions based on that. The key is to have the patience to form that image; and we can certainly learn that simply by playing with Lego Bricks.

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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 doesn’t own shares in any companies mentioned.