Similar themes in parenting and investing

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If you think about it, there are actually a lot of similarities between parenting and investing for the long haul. Well for one, the outcomes are likely to be unpredictable at times in terms of both meeting expectations and timing. They can either fall short or exceed what is desired – either for the near or long term.

For instance, a child that does not do as well as hoped for in the PSLE or other stages may end up making the parents proud later in life. That is because like parenting, we often set investment horizons in terms of milestones – be it five years (six if you have a child in primary school), ten years or more.

Patience

Both processes call for lots of patience, and yes, trial and error but with good intentions and fine-tuning along the way. The rewards for a parent are emotional while for investment, monetary by way of returns.

Not everything will turn out as planned.

For the parents, remember the music, dancing or coding classes that did not produce the results imagined or hoped for? For the investor, it is about the investments that went awry and opportunities missed. To be sure, there are going always some regrets in both camps – those ‘what if’ moments.

Both rides can be emotional and in some cases accompanied by roller-coaster moments such as a sudden emergency or financial scare. And yes, there will be the occasional heartbreak and sleepless night fretting over what should be the next course of action.

That is because both kids growing up and markets display traits that are not always within our control. Try as much as we can, there will be external influences. The behavioral patterns can sometimes be seen as rather frustrating, puzzling and at times even irrational, but may turn out to be otherwise on hindsight or by din of a change of fortune or attitude such as an unexpected source of motivation or stimulus.

Learning Process

Mistakes are not only inevitable, but they become part of the learning process. Both the positives and negatives offer clues and lessons. There will be risk-taking; there will be noise. One learns to discern.

One also learns not to beat ourselves up, but remind ourselves that it is important to stay in control of emotions and not feel despondent. It is how we respond that matter, and certainly not on impulse as regrets will likely follow. It takes some steel not to overreact to temper or taper tantrums. With experience, one also learns not to sweat over the small stuff or minor setbacks but rather stick to the merits of staying cool and staying calm. And not give up.

With hindsight and sufficient knowledge gathered along the way, we may come to a realisation not to rush into outcomes, but to stick to a process. We learn not to overstretch and decide where the values are.

Perseverance

In both parenting and investing, we do our due diligence. We learn to assess the pros and cons. We create margins of safety, contingency plans and exit strategies, just in case a change in tack is needed. It is also all right to seek professional advice and not to be sidetracked by constantly comparing achievements with other parents or investors who have different set of resources and game plans and instead keep focused on what is important within our own orbital control.

We also learn to persevere in good and bad times, sticking to plans that were laid out and put into motion, though some tweaks may be necessary from time to time due to change in circumstances as what we would do as part of financial planning during the different phases in our lives.

Ultimately, in both parenting and investing, it is about keeping our eyes on the larger goals; not losing sight of the key objectives and let time work out the outcomes. On average, one should come out ahead if we do our part and recognise that it is done for long-term benefits. The rewards do compound over time if one stays the course.

Be patient. it’s worth the ride.