So you’ve heard the unfortunate news by now – most stocks stink. Only one in three beats the market and almost half of all stocks lose money over the long term. Womp womp… And yet, that doesn’t change the fact that investing in individual stocks is fun, especially compared to the unexciting process of owning a well-diversified portfolio that successful long-term investing entails. So do investors have to be “all work and no play” to be successful or is there a way to have your cake and eat it too?

Is the Goal to Have Fun or Achieve Your Financial Goals? 

Famed investor George Soros once said, “If investing is entertaining and you’re having fun, you’re probably not making any money.” It’s like indulging in sweets instead of veggies – they taste great but won’t get you ready for swimsuit season! Identifying your primary goals is a great first step toward a successful outcome in any aspect of life.

What Investors Can Learn from Fitness Gurus

Fitness coaches often suggest sticking to a strict diet six days a week, then having a “cheat day” on the seventh, where you can eat whatever you want. The idea behind a cheat day is that indulging occasionally can help you stick to your diet overall and boost your chances of reaching your long-term fitness goals. It’s all about progress, not perfection.

When Cheating Is Actually a Good Thing

Let’s face it: staying disciplined with saving and investing for the long haul through up and down markets isn’t exactly thrilling. Frankly, it can make watching paint dry look fun. Just like craving chocolate, many investors enjoy taking risks on individual stocks or specific market sectors – including this guy. Want to jump on the Nvidia train betting it continues to skyrocket? Roger that. Love your iPhone and iPad so much that you got a Steve Jobs tattoo and want to buy some Apple stock? Invest away. If you consistently make smart investment choices towards your long-term financial goals, setting aside a small chunk of your portfolio for more adventurous investments as your cheat day can actually help you stay on track in the long run.

Separating Business & Pleasure

If having a bit of investing “fun money” to play with satisfies your cravings, gives you something to chat about with friends over drinks, and keeps you focused on your overall investment plan, it’s a worthy consideration. I allocate a small portion of my portfolio to individual stocks because, well, it’s fun. (And no, I don’t have a Steve Jobs tattoo…yet.) 

The key here is to keep your fun money separate from your serious, long-term investments – they’re like oil and water. To make sure you don’t mix them up, have a separate account for your cheat day investments. This helps keep the two investing buckets physically AND mentally separate. Because it’s not the occasional slip-up that messes up our diet (or our financial plan), but when those occasional slip-ups become the norm.

Castle Quote: “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” — Paul Samuelson