They say prevention is better than cure. Yet, when it comes to money, most investors seem determined to learn this truth the hard way — by burning their fingers in hot IPOs, losing their savings in speculative trading, or chasing the next crypto craze that promises overnight riches. The list of financial misadventures is endless, but the pattern is always the same: excitement first, regret later.
The reality is, investment mistakes are inevitable. Every investor, no matter how disciplined, goes through a phase of experimenting, testing boundaries, and occasionally making poor choices. But there’s a smart way to make mistakes — fail fast and fail cheap. That is, make your early investing errors quickly, with limited amounts of money, so that the financial damage remains small but the lesson stays with you for life.
This philosophy mirrors what happens in the world of start-ups. A bad business that collapses early saves everyone — founders, investors, and employees — from prolonged agony. Similarly, an investor who experiments early with small sums learns invaluable lessons before the stakes get high. Think of it as the “vaccination theory” of investing: you expose yourself to a small dose of risk early on to build immunity against bigger financial blunders later.
Here’s an uncomfortable truth — most people don’t learn from reading financial advice. They learn from experience, especially painful experience. You can warn someone a hundred times about the dangers of speculative trading or overconfidence in IPOs, but until they experience a loss themselves, the lesson rarely sticks.
Now, imagine a 25-year-old with Rs 50,000 in savings who decides to try her hand at derivatives trading. Six months later, she’s lost half of it. Painful? Absolutely. But that Rs 25,000 might be the best tuition fee she ever pays. Having learned the emotional toll of speculation first-hand, she’s far less likely to risk her life savings on such instruments later. Similarly, a young investor tempted by a shiny, loss-making IPO could buy a handful of shares — not enough to cause financial ruin, but enough to observe what happens when hype meets reality.
The key lies in three words: quickly, cheaply, and consciously. Don’t drag your learning over decades or experiment with large sums. Allocate a small portion of money you can afford to lose completely. Treat it as an investment in your financial education. Try the things that attract you — trading, cryptocurrencies, IPOs — and when the inevitable losses come, learn from them. Once you’ve earned those hard lessons, shift your focus to sound, long-term investing.
This approach has several advantages over the traditional “avoid all mistakes” mindset. First, it accepts human nature. We’re wired to be curious. We want to test things ourselves rather than blindly accept others’ experiences. Second, it ensures that the lessons are memorable. Losing Rs 5,000 on an impulse crypto trade will teach you more about market volatility than reading a dozen financial columns ever could. Third, it helps you get your mistakes out of the way early — when your income is modest, responsibilities are limited, and time is on your side to recover.
Today, this idea is even more relevant because of how easily accessible investing has become. With a few taps on a smartphone, one can trade derivatives, buy IPOs, or invest in digital assets. The flood of online influencers, brokers, and financial apps has made it almost impossible for young investors to resist temptation. Traditional advice that simply says “don’t do it” no longer works. The more realistic approach is to allow limited experimentation — but within boundaries that protect long-term financial health.
The danger lies not in making these early mistakes, but in making them late in life when the sums are larger and recovery time is shorter. Losing Rs 10,000 at 25 hurts far less than losing Rs 10 lakh at 45. The earlier you make your small, affordable errors, the faster you can develop financial maturity — and avoid costlier ones later.
Ideally, we’d all learn from others’ mistakes. But since that rarely happens, the next best option is to fail early, fail cheap, and learn deeply. The goal isn’t to avoid every stumble but to ensure that your stumbles happen when you can afford them.
Because in the long run, experience is the best teacher — and in the world of investing, it’s also the most expensive one. The trick is to pay your tuition fees early, when they’re still affordable. Your older, wiser self will thank you for it.
(The writer, as Founder and Chief Financial Coach of PlantRich & Vama PlantRich, has coached 5000 plus corporate professionals in rewriting their money story)
