What my childhood chemistry set taught me about investing;
OR – Experimenting is fun, but you might blow something up.
When I was in grade school I bought a chemistry set through a Boy’s Life ad using money saved up from my paper route.
I recently found my chemistry set on two very different but satisfying lists:
- The 100 Greatest Toys of All Time AND
- The 8 Most Wildly Irresponsible Vintage Toys.
My completely amazing chemistry set came with a variety of chemicals, test tubes, beakers, litmus paper, other paraphernalia, and an instruction book for experiments. I started out following instructions and doing things like putting chemicals in test tubes (with or without a stopper), heating over a flame… you know – all the things that parents want their grade school kids doing in their bedroom behind a closed door.
I was soon familiar with my set, bored with the guidebook and impatient to make things explode. So I started doing my own experiments.
I began mixing a solution of random chemicals in a pie tin. Nothing exciting was happening (at least at a visible level). I wondered “what would happen if I introduced electricity?” After all, seeing the movie “Frankenstein” told me that electricity could make exciting things happen.
So, I took a lamp and pulled out the cord. I stripped the ends of the cord so the copper strands were exposed a couple inches.
I put the end with the exposed wire in the pan of chemicals.
Then I plugged the cord into the wall. There was a spark and a flash… and suddenly I could not see anything. The good news was that I did NOT get a bath of flaming toxic chemicals exploding into my eyes (which would have actually been okay if I got the Matt Murdock result of then becoming Daredevil.)
The bad news is that instead of producing an exciting and productive reaction in the chemicals, my experiment only produced a blown fuse and a very irate father. (But remind me to tell you about the time my dad used my finger in the spark plug cap on the then-not-functioning lawn mower to test whether or not the magneto was sending electricity to the spark plug. It was.)
I didn’t realize it at the time, but I was lucky. Could have been a lot worse.
I’ve learned some similar lessons from investing. Following the guidebook and utilizing the known investment science that considers probabilities, risk measures, asset allocation models, etc, can be boring. But boring outcomes may more predictably bring the long-term results we are seeking and random experiments may blow up the lab.
Read more about essential, time-tested principles that have made it out of the lab and into the guidebook here:
As an investor, I learned that an informed, persistent plan has significant long-term advantages over random experiments. Succeeding in a long-term goal is plenty exciting… if you are willing to wait.
That does not mean that we can’t conduct experiments and try different things. It just means that if we choose to pour random chemicals into a metal container and stick a live electrical wire in it, we need to make sure we are taking all the proper safety measures and protecting ourselves from harm if the experiment fails or explodes.
Or, we can get our little brother to do it for us.
The opinions expressed in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.