11 Oct Parenting and Investing – 3 Reasons Why They are Actually The Same Game.
My kids are now one and three and I enjoy their company tremendously. I especially love it when it is late at night and they finally fall asleep on me. Ask any parent and they will tell you that it is most calming and therapeutic to watch their baby chests rise and fall as they waddle through their little kiddie dreamland.
That is the time where peace prevails and my thoughts are allowed to wander. I think about happy things like how awesome they have been. I also think about more flippant things like why I can never seem to get the lyrics of Thomas the Train theme song right. And just the other night, watching the kiddos resting, I came to realise that the game of parenting actually has so many similarities to the game of investing.
So here are three reasons why parenting and investing are actually, really, rather similar.
Investing is Patience. Parenting is Patience.
When I first started investing, I came across this joke.
Question – What are impatient investors called?
Answer – Traders.
I did not fully comprehend the meaning behind it until many years later. Essentially what it meant was that there are no impatient investors. Patience is a pre-requisite to play the investing game. Without patience, One. Cannot. Be. An. Investor.
Ask a newbie what is so difficult about investing and they will tell you it is picking the best stocks to buy. Ask an experienced investor and he will tell you a different story altogether. Identifying which stocks to buy is the easiest thing to do. It is having the patience and conviction to hold on to the stocks till they realise their value that is the hardest. That process may take months and even years.
And parenting is patience. Parenthood is the time whereby the real meaning of patience is examined on a daily basis. Your kids are there to test your patience. Some kids can be more trying than others, but at one point or another, your most extreme patience as a parent would be called upon.
Once, I remembered being real smug about my own parenting abilities when I spent an hour talking my kid out of his grand plan to refuse his nap, milk and shower. Patience – Checked. Easy peasy I remembered telling myself. Bring it on, kid.
And bring it on he sure did. The next time round, rather than choosing an occasion where I was well rested and had no pressing deadlines, he decided to challenge me when everything was coming together and I was sleep deprived, had overdue work to turn in and a tight travel schedule to content with. That was when I understood the true meaning of patience.
Well meaning friends have since warned us about ‘terrible twos’, the age where kids start to assert their independence and grow a mind of their own.
When it started happening to our kid, we could almost understand why. Two is the age where kids could say what they want, but could not verbalise why they wanted it. Two is also the age where they know what they do not want, but cannot find the words to disagree. A two year old experiences feelings and emotions. Yet he is far too young to express anger or sadness in words, only action.
And once in a while they go into meltdown mode. All forms of rationality goes out of the window. Our little friend would just brawl and frail his arms and kick his legs and reject anything or anyone that even comes near.
It was frustrating at first. Why must he do it again, we would ask ourselves as parents. We gave him everything he wanted. We did everything we could. Why must he be so difficult? We wanted to get him to stop and we wanted him to stop now. Yet, the more we tried the more he became emboldened. We were totally helpless.
Until we discovered this little hack. Every time my son goes into meltdown mode, we would just hold him tight and asked him ‘if he is ready’. We would not make any other comments but prompt him with this question at regular intervals.
He would still brawl his heart out and it would still take some time before he calms down. When he does, all he needs is to respond positively to our question and then all parties will know that the drama is over.
With this process in place though, it helps with two things.
1. It allows him to come back to us on his own terms. It is one thing to have to stop crying because you are being screamed at. It is another to be given the opportunity to do so willingly. It makes for a much happier kid.
2. It gives us as parents a dispute resolution framework to rely on. Instead of feeling hopeless and helpless, we now know that it is a matter of time before he calms down and things go back to normal again.
The stock markets, like kids, are equally prone to meltdowns. The meltdowns will not be your doings, because as an investor you probably would have done everything to prepare and guard against it. The meltdowns will occur at the most inopportune time, just when you are thinking of reducing your investment portfolio to buy a house or channel some of it for retirement expenses.
The meltdowns will render you helpless if you do not know how to react to it. The meltdowns will be emotionally draining. The meltdowns are unavoidable – the only way for you to avoid it is to not invest.
Parenting Processes and Outcomes
We have written about processes and outcomes often on BigFatPurse.
There are two ways an investment can turn out. The outcome can either be positive, when an investor makes money or negative, when an investor loses money.
The process to arrive at the outcome can also take two forms. It can be a good, structured, disciplined process, or a bad, haphazard and random process. A good process requires an investor be diligent about investing, constantly learning and investing and most importantly having a system in place. A bad process is akin to gambling – relying on tips, chasing markets and buying stocks on hope more than logic.
A good process does not always lead to a good outcome, a diligent investor can still lose money. A bad process may not neccessary lead to a negative outcome, an investor could get lucky and still turn a profit. We have always reminded investors not to confuse the process with the outcome. We have always reminded investors not to remain fixated on the outcome but rather work hard to build the right investing process.
It is extremely important to understand that processes are within our control and outcomes are not.
It cannot be more true for parenting. As parents we want our kids to ‘turn out well’. We have high expectations. We send them for enrichment classes of all sorts. We make them pick up many skills. We want them to be like the most awesome stock we can ever buy, giving us returns many times our initial investment. And we get upset when they do not live up to our expectations.
Parents remember this – How our kids turn out is an outcome. And outcomes are never within our control.
Rather, we ought to focus on the process. We ought to let our kids enjoy the process of learning and the process of growing up. We can provide as conducive an environment for them to grow and learn, that is within our control. But the outcome – whether they turn out to be great scholars or artists or musicians, that is totally beyond our control.
There are more similarities to come!
There are a great number of similarities between being a parent and being an investor. Do you have a story to share? Drop me an email ([email protected]) or leave a comment to tell us more!