Forrest Gump once said, "Life is like a box of chocolates." The Motley Fool has said, "Investing is like cats." And golf. And church burnings.
As Dave Barry would say, "I am not making this up."
In fact, it seems the only thing we haven't compared investing to is... a box of chocolates. Here are some examples of what I'm talking about. Simply click the links to read more.
Investing is like:
Do you love games? David Gardner says investors certainly should. In fact, everyone should. For starters, life is a game. A great big board game.
When you play the game of business, you begin with these two critical questions:
1. What constitutes victory? (Define that.)
2. And what leads to that victory? (What success factors lead to your definition?)
Golf and investing have some real similarities, says Bill Mann (TMF Otter). They are individual pursuits. You only benefit in golf from your own decisions, and execution thereof, as they relate to the outside environment at hand. Investing is no different: You can be really, really intellectual about it, and still generate subpar returns because of an emotional incapability to react properly to opportunities and challenges.
Former Fool Ann Coleman believes investing is like shopping for a major purchase. First, you'll be happier if you take the time to learn the limitations and risks before you make your choice. Second, you have to buy the product that is right for you, not the person you want to be or used to be, but who you really are.
This is one I wrote almost two years ago. Investing and running require similar preparation. It will take weeks, and even months, to complete the proper "due diligence" required to fully understand a particular company.
Both demand persistence. Leaning to be a good investor is a never-ending process. There's always more to soak up -- more out there that can make you better. If you can't make the effort to further your education on an ongoing basis, you'd probably be better off investing in index funds and relaxing. But those willing to make the commitment have the potential for greater wealth years down the road.
A cat is actually a master of finance, and we can all benefit a great deal from his financial prowess. Here are just three of many examples from Mathew Emmert (TMF Gambit):
1. If you can't make time to lick all your paws, it's OK to lick just one.
You don't have to figure out your entire financial life before taking your first investment step. Just get started. No excuses. No procrastinating. Open a savings account. Fund a Roth IRA. Use the Fool's Broker Center to buy your first stock or index fund.
2. Feed me consistently, if not constantly.
Making steady contributions -- be they to a 401(k), IRA, or regular old dividend reinvestment plan -- is the best way to build wealth over time.
3. Bury anything that smells bad.
Many companies lurking in our portfolios are dead and buried long before we decide to clean out the litter box. Never be afraid to sell a bad investment and move on.
A CD player
It was former Fool Ethan Haskel who said investing can be a lot like CD players. Sure, it can be fun choosing among thousands of stocks to find just the right ones. By tweaking our databases, using all the "bells and whistles" now available to the individual investor, the returns can be quite rewarding.
Of course, like Ethan's CD player, there can be quite a bit of maintenance involved with choosing stocks. Sometimes just a handful of good stocks, like a five-disc CD player, is all you need.
Reader Dan O'Brien came up with this comparison while penning a Fribble. Depending on your goal and personal temperament, you make decisions about how to drive -- speed, lane choices, distance between you and the car ahead, and so on.
So what's a Foolish way to drive? The ebb and flow of highway traffic sometimes comes to a complete stop. Instead of trying to second-guess the queuing gods and betting on this lane or that, just stick with your lane and, sooner or later, you'll get back up to speed.
The dodgers are the short-term traders, swerving to ride a trend before it reverses, trying to time what is fundamentally a random event.
Those in the slow lane fancy themselves solid citizens observing every law, but they find themselves constantly readjusting to the flow of traffic on and off the highway, braking to avoid those who remember their exit at the last moment and those who don't understand the concept of "yield." They scan the personal finance magazines, trying to find "where to put money now."
The preceding were just warm-ups to the Queen of Comparisons, Selena Maranjian (TMF Selena), who deserves her own category. Here are just some of her fine efforts:
After her parents' church burned down, it occurred to Selena that there are a lot of parallels between church burnings and investing. For example:
An unexpected catastrophe: No one expected that the church would catch fire. Similarly, no one expects the stock market to crash on any particular day or year.
Dangers: When facing disasters, or the aftermath of disasters, some feel tempted to act rashly. At her parents' church, one member of the staff reportedly ran back into the evacuated burning building to retrieve important papers. Fortunately, she made it out and spent no more than one day in the hospital. When faced with a plunging portfolio, you may feel an urge to sell things willy-nilly or to quickly invest in other things that suddenly seem cheap. But that's not a good way to face disaster. Resist the temptation to act hastily.
Priorities: With a burned church, a minister shouldn't summon his congregation to arrive the next Sunday with armloads of bricks and boards. Instead, the church has to start reflecting -- then prioritizing. Priorities are as important in investing.
Good from bad: Much good can come from a disaster, although, of course, we'd prefer to get the good without the disaster.
Selena sees a connection between mythology and investing. Perhaps, she muses, the ultimate Sisyphean investment is gold.
An episode of South Park actually gave Selena some insights into business and investing. The underpants gnomes have built a business based on "Phase One: Collect underpants. Phase Three: Profit." Look around your portfolio and you might discover some similar firms missing that critical element: Phase Two.
The Donner Party
The world of investing has its pitfalls, and the Donner Party has a lot to teach us, if we think about it.
Think of the 87 original pioneers as investors. They want to achieve a certain goal -- earning handsome returns on their investments. What are their choices? Well, they can either follow the well-worn route, which they know isn't that efficient. Or they can try this newfangled path.
The well-worn path might represent options like mutual funds, bonds, CDs, baseball cards, antiques, and/or savings accounts. The exciting new alternative might be day trading, options and futures, newsletter recommendations, or looking for shapes of barnyard animals in trading-volume charts.
What can investing possibly have in common with Hippo feet? In this Fribble, Selena saw some interesting parallels between the discontinued Foolish Four and four big, strong, solid hippo feet.
As for me, I might as well complete the circle and tell you that investing is an awful lot like a box of chocolates. When you dig into a company, you never know what you're gonna to get.
Open up Microsoft
As Forrest Gump might say, "Now ah's heard ever thang."
Rex Moore is still unsure about this whole nougat thing. At press time, he owned shares of eBay and Microsoft. You can view his other holdings and the Fool's disclosure policy after you finish your chocolates.