What does it Mean to take Baby Steps in Investing?


One of the interesting things about investing is that almost always, the best course of action is to do absolutely nothing. As human beings we are not really designed for this. Our hunter gatherer brains are still wired to understand that activity means reward. Hunters or gatherers who just sat around the African savannah didn’t live very long and eventually the genetic traits that led to their passivity died off.


So it’s no wonder that people have a hard time with proper investing, where for most people the best thing they can do is to buy high quality investments and then hold them for a really really long time. Those assets could be good publicly traded stocks, ETFs, Mutual Funds, private companies, real estate, farmland etc. By and large I believe this is the best way to invest.


But there is such a thing in investing as not being active enough. This might seem a little out of context as the brokerage firm Robin Hood plans to go public this week, but not enough activity can also be a problem in investing just as too much activity can be a problem.


The first thing is to know when you are not being active enough. As this is a less common problem then being too active, we can safely assume that many people reading this do not have this problem. However there are some investors who are content to sit and sit and sit and do nothing while valuable opportunities are missed. This may be out of fear of making a mistake and losing money. It may also be because of overconfidence, thinking that they can predict a downturn in the market and are thus happy to wait for that downturn which never comes.


It could also be because of neglect. Many investors are amateur investors who do not spend every waking moment thinking about markets (very surprising I know). As such they fail to monitor opportunities closely enough and hold on to previously selected securities well past their best before date. (This is also true of some professionals mind you but it is less understandable when a professional neglects their portfolio.)

So that’s the tricky part. We want to be very patient with our investments, because we know that the best path to success is to buy and hold investments for a very long time. But the flip side of that is, when it is time to act, we need to be willing to ACT, and often ACT in an aggressive way!


One of the most common examples where a person is unwilling to act is where they have bought an investment which has gone up a lot. Investors have a habit of “falling in love” with a company, and that can make it extremely tough for them to part ways. Investors hate to sell their winners and indeed in a lot of cases, selling a winner is a bad investment decision.


However, there is a point where any stock, no matter how good or profitable becomes overpriced and the proper rational decision is to sell it. Figuring out when to sell is a very complicated process and I’m not going to get into the details here. What I am going to do is to tell you HOW to sell once the decision has been made that you should.


There is a well known saying that goes like this:

Q: How do you eat an elephant?

A: One bite at a time.


The saying means that the best way to tackle large, seemingly impossible tasks is to take them one step at a time. Similarly there is a parallel to investing. If you have an investment that you know you should sell, but you are having a hard time emotionally with actually pulling the trigger, then it is best to sell a small amount of it at first, and to continue selling small amounts at a time until you have eventually sold the whole position. This strategy has a very important financial advantage, and an equally important emotional advantage:


  1. The financial advantage is that you will have sold an overpriced investment and the probability is that you will be ultimately better of financially then if you had done nothing.

  2. The emotional advantage is that you have created a situation where you win no matter what happens. If you sell a small amount of a stock and the value of the stock continues to rise, then you will still be happy because you still own a substantial amount of it. If you sell a small amount of stock and then the stock plummets, you will be able to comfort yourself in the fact that at least you sold some, and you will also have some cash available to buy back into the stock at much lower prices.


This is win-win! And more importantly you will have overcome a major emotional obstacle which would have caused problems for you if you had done nothing.


Interestingly this advice also works for financial planning in general. Many people don’t even want to address their financial planning because the problem seems so huge that it seems impossible to solve. But again the best method for accomplishing it is to just get started, with whatever small steps you can take now to make it happen in the future. Einstein said that compound interest is the 8th wonder of the world. Over time, small steps lead to huge results. The important thing to is to make sure you are taking those small steps.



Too much activity can be a real problem in investing, but not being active enough can also be a real problem. If you take small steps when the time is right, you should be able to find the right balance between the two.


- Craig White, BA, LL.B., CIM®


Craig White is an Investment Advisor at Endeavour Wealth Management with iA Private Wealth, an award-winning office as recognized by the Carson Group. Together with his partners he provides comprehensive wealth management planning for business owners, professionals and individual families.

This information has been prepared by Craig White an Investment Advisor for iA Private Wealth and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Investment Advisor can open accounts only in the provinces in which they are registered.

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