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Stock market financial exchange and Trading graph technology concept
Which investing errors are the most common? John Wyn-Evans outlines the impact of margins of error, compounding returns and sequence risk.
Sometimes life delivers timely reminders about the nature of compounding errors and the need for a margin of safety. One morning last week, I set off from home for a meeting at 11:30. An app had me arriving there at 11:25 if I left at 11:00. I ended up leaving a couple of minutes late, but was not concerned. I arrived at the station just in time to see the doors close on the train I should have been on, with the next one three minutes away. That should be okay, I thought.
The same thing happened at my interchange, leaving me with the choice of then taking the next train that would involve a longer walk or waiting for the second train a couple of minutes behind that would leave me a marginally shorter walk. I opted to take the first train, which then sat outside the station for what seemed like an eternity, waiting for the track crossing to clear. Meanwhile, the train behind overtook us on the other line. Needless to say, I ended up being 10 minutes late, all for the sake of the odd minute at the beginning of the journey.
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