Explaining Investing In Ways That Make Sense

Investing can be intimidating. It’s the intersection of big numbers, emotions, salespeople, and the future.

But it doesn’t have to be. It’s not a complicated subject. People understand investing better when you compare it to other things they’re familiar with.

Here are a few.

Financial planning is like designing a bridge. You don’t calculate exactly how much weight the bridge will be able to hold; you build it with so much room for error that there’s almost no chance it will ever be overloaded.

Asset management is like US politics. Just as much, if not more, effort is spent fundraising than for actually working for clients/constituents.

Compound interest is like planting oak trees. One day’s progress shows nothing, a few years’ progress shows a little, 10 years shows something big, and 50 years creates something absolutely magnificent.

Investing is like math. People try to woo you with complexity, but the simple elegant stuff is what’s really powerful.



Derivatives are like Gucci handbags. They have some practical purpose, but mostly they’re an attempt to impress other people at the benefit of sellers and middlemen.


Investing is like being a pilot. As a pilot once said, his job is “hours and hours of boredom punctuated by brief moments of terror.”

Investing is like sports. People argue in a my-team-versus-yours way, but in reality we’re all chiefly at the mercy of chance.

Investing is like history. So much stuff has happened that you can always find a story to back up any crazy idea you can think of, and what’s right can be far different from what’s both right and in context.

Personal finance is like medical treatments. There is no “right” answer. Some people will rationally forgo treatment/investments that other patients insist on, because everyone’s goals, priorities, and tolerance for risk are different.

Investing is like a car wash. You can probably do it yourself just fine, but paying someone feels better and, importantly, they’ll clean the undercarriage, which is the most important spot since it’s prone to rusting.




Deep bear markets and economic depressions are like world wars. They have occurred so infrequently that we can’t study them in a way that will indicate what to expect in the future. The sample size is just too small.


Financial analysis is like wine ratings. There are some good rankings, but in general, so many people put their faith in so much subjective nonsense that it’s hard to fathom.

Share buybacks are like frequent-flyer miles. The can be hugely valuable if used properly, but in many cases it’s just a big exciting number on a statement whose value is never redeemed or achieved.


Investing is like running a marathon. As the saying goes, “it’s a marathon, not a sprint.” But most people don’t have the endurance to run a marathon because they try to sprint.


For more investing insight and important updates about what's happening in the world of finance, you can sign up to The Motley Fool Singapore's free weekly investing newsletter, Take Stock Singapore. Written by David Kuo, it can help you grow your wealth in the years ahead.


The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. This article was written by Morgan Housel and first published on It has been edited for