Penny Wise, Pound Foolish: A Small Investing Mistake That Taught Me a Bigger Lesson

“Penny wise, pound foolish” is a phrase I have heard since I was young, usually used to describe people who focus too much on small savings while missing the bigger picture.  Over time, I have realised that this saying applies surprisingly well to investing, and more uncomfortably, to my own behaviour as an investor.

There have been many occasions where I wanted to buy a particular share, but instead of relying on valuation, fundamentals, or any form of structured analysis, I fixated on a price that simply felt right.  That number was not derived from spreadsheets or charts.  It was just a number that I felt nice to own the stock at, such as whole numbers or seemingly auspicious numbers ending with '8', and I told myself I would only buy if the price came down to that level.  If I am lucky, sometimes it did.  When it did, I felt delusionally clever, disciplined, and patient.  It reinforced the belief that waiting was the right thing to do.

However more often than not, the opposite happened.  The price of the shares I am interested in did not come down.  It moved up instead, and I was left watching from the sidelines, holding cash and second-guessing myself.  In those moments, it became clear that the amount I was trying to “save” (usually SGD 0.05 or SGD 0.10 per share) by waiting was usually trivial, especially relative to the long-term potential of the investment.  On a small position, that difference might amount to only a maximum of tens of dollars in total.  Yet the cost of missing the purchase, in terms of opportunity, compounding, and peace of mind, was far from trivial.  This is where the idea of being penny wise but pound foolish really comes into play.

What makes this behaviour particularly tricky is that sometimes, it feels like discipline.  After all, good investors are supposed to be patient and avoid overpaying for good companies.  The problem is that patience without a framework can easily turn into hesitation, and hesitation, over time, can quietly erode returns.  What was lost in these moments, was opportunity cost.  By not buying, we are not just avoiding a slightly higher entry price, we are also delaying ownership of the business, dividends and the chance to compound.  Over long periods of time, these delays can matter far more than the few dollars we were trying to save at the beginning.

As such, should we always just buy at market price?

The answer is not a simple yes or no.  There are valid reasons to wait.  If a stock is clearly trading above what we believe it is worth, or if we are already heavily invested in a particular position, or if market conditions feel excessively euphoric, then restraint is part of responsible investing.  Besides the above probably it is better to just buy.

This idea is something Nick Maggiulli explored in Just Keep Buying.  One of the key messages of the book is that long-term wealth is built through consistent participation, not perfect timing.  Many investors spend enormous amounts of time trying to optimise their entry prices, yet underestimate the cost of sitting out of the market altogether.  In reality, being invested, even imperfectly, often matters far more than getting the “best” possible price.

Reflecting on this, I have come to realise that a fair price paid today for a good business is often better than a great price that never gets filled.  The market rewards those who stay invested, not those who wait endlessly for the perfect setup.  This is especially so when I am a self-proclaimed long term dividend investor.  The most beneficial way of investing for myself, should be to select good businesses, buy, hold and collect dividends at the meantime.  If business fundamentals remain positive, the share price will continue its upward trend with time.  It may not be immediate, but patience pays, and this patience is made sweeter by the dividends payout in the process.

Over time, I am learning that investing is not about being clever in the moment.  It is about building habits that allow compounding to work quietly in the background.  Sometimes that means accepting that we will not always get the perfect price, and that is perfectly fine.  This is because in the long run, the most costly mistake often is not paying a little too much.  It is not buying at all.  Barista FIRE, here I come...!