Gold Coin Bag11 May 2021
Somewhere deep inside rural India in Rajasthan, there lived a very old man with many children & grandchildren, he has spent most of his working youth years in oils fields in Gulf & made good fortune & now was living a retired life.
He always saw his children working hard & thinking to save for future, so he thought of teaching them a life lesson, he created three bags full of coins & in each bag he kept three different types of coins, first was Indian coins of 50 paisa & 1 rupee & other was of silver coins & the third one was of pebbles.
He wrote a letter stating that he is going out of village for few months & have kept all his savings in few different bags in form of coins.
As days passed, his children became curious & started looking for the bags, They have heard that their father has earned well & hence was wealthy, so they went searching for bags, with all their efforts they could only find three bags, but they were looking for bag full of gold coins which they never found, they kept looking for hours & days but it was never found. They were also puzzled about the bag of pebbles, so they decided to wait for him to return back & answer them.
They kept the two bags but threw the bags of pebbles, when the old man returned, they narrated the whole story, the old man was not worried about Rs cons & silver coin bags but wanted to know where his bags of pebbles was.
When they told him that they have thrown it out, he asked them to search for the same & bring it back, with all their efforts they could retrieve the pebbles & then the old man showed them that he has hid the gold coins in the pebbles.
While at the outset this seems to be a simple story, there are few interesting lessons for us.
Just like the children of the old person, when it comes to investing, we seem to have our own version of ‘bag of gold coins & in pursuit of the same we ignore all other coins.
Market rewards people well in long term & only when we are able to ignore the news & volatility of short term.
So the question is how to invest in market & get the gold coin bag easily.
The answer to this question is that while everyone would like to have the gold coins but one will have to keep even the currently pebble looking coins to realise its full potential.
If we look around, we can find some very suave investors with long experience in market & learn from them.
Can you name a investor who have 'consistently' identified bear markets, stepped out before the fall, and entered back at the bottom?
You can take all the time you want. If you are finding it difficult to find even one name, no worries. I have one such name-
- Warren Buffett
Inevitably over the years, I have realized that the mistakes done trying to avoid a market decline is actually more damaging than enduring the actual market decline. If 2020 has taught us all one thing, it's that no one-no one-knows what markets will do in the short run.
Focus on what is in Our Control.
While our inevitable search for Gold coin bag continues, we unfortunately forget to take advantage of the three existing goats completely under our control.
1. Optimism: Belief in entrepreneurs and human ingenuity.
2. Long-time horizon: Patience to let compounding do its magic
3. Capacity to suffer: Ability to endure temporary declines.
Despite the overwhelming evidence against market predictions, most of us would rather fail trying to find the Gold Coin than succeed by focusing on the three existing coin bags that are completely under our control.