Investment Shastra

In the Investing Race, Tortoises beat Hares, but it’s hard to stay a tortoise…until now!

We have all heard the story of the race between the Hare and the Tortoise.  And as children we are disappointed that the Hare loses the race. It’s unbelievable how the fast, alert and smarter looking hare loses the race. As a child I was convinced that the adults have rigged the story to teach us some moralistic nonsense. Which stupid tortoises who can’t even walk fast agree to a race? And why would a hare go to sleep in a race when he can finish the race in no time and then go to sleep.

Hares think they are running a 100-meter race

When I was older I realised that I had assumed that the race between the hare and the tortoises was a short one, that all ‘races’ are short. Most people behave as if the race they are in is a short one and this is most visible in the world of investing in the stock market.

Investor – Hares think the race is a short 100-meter sprint. So they want high returns and for that they take high risks. They are over-confident about their ability to pick stocks and are hypnotised by the good times, by the rising stock prices. And their gains seem to tell them that they are really smart at this and they buy even more. They also over-estimate their ability to stay calm if the market crashes. In their preoccupation to moving fast they do not develop the skill to watch out for dangers and eventually they trip and trip badly. And then the market corrects, because it eventually does, and the hares panic. Hares also forget that the stock market has more ruthless animals- hyenas and wolves who also running the race. And they all love a good rabbit pie.

Tortoises know they are running a Marathon

Tortoises have one of the longest lifespans. I guess this makes them wiser. And probably they know that any race worth running is a marathon not a sprint. Growing older one realizes that life itself is a marathon and that’s a good thing. Investor-tortoises are slow creatures, cautious, unwilling to take high risk. When their stocks perform really well they attribute it to luck, not their foresight. When the markets run up, they fear a correction is round the corner. They go at their own pace, forever carrying their protective shell.

As in the story, hares will be ahead of the tortoises for some part of the race. But eventually the tortoises win.  

But it’s hard to stay a Tortoise

When our natural survival instincts drive us to follow the herd, mimic fellow-mates, it is difficult to do and be otherwise. An Investor-tortoise is required to take actions which are contrarian to the popular and loud voices of experts and the media. This is not easy to do. And then there is the waiting, the patience required before you get the confirmation that your decisions were right. This raises self-doubt – a source of discomfort. And when the hares are well ahead and celebrating, to not get tempted to join them is the most difficult. So, staying the course even though it the sensible thing to do, is not easy.

Joining a community of like-minded investors can make a big difference  

At MoneyWorks4me, for more than a decade now, we have been focused on making investing safe and simple for retail investors.  We have seen that while many register on our site for the free features, only a few progressed to making safe and sound investing decisions a way of life. We  have just launched the MoneyWorks4me Sensible Investing Club to provide the environment for Tortoise-investors to flourish and stay true to their style of investing.

The root of the word discipline and disciple is the same; which meant a follower of a guru, a principle, a way of life. However, when used as a verb,’ to discipline’ stands for punishing someone to make them follow certain rules. This has made most of us hate the word discipline. We obviously cannot impose any rules on you but want to inspire you to choose to follow fundamental (and simple but not easy) rules that govern investing. Like any physical laws of nature that govern how things work, failure to understand, appreciate and follow these laws leads to ‘loss’ and failure. To that extent we end up being ‘disciplined’

And what is the discipline of investing sensibly?
The Discipline of Sensible Investing:

  1. Stay invested and let the power of compounding do it’s magic.
  2. Do things that help you stay invested; avoid the rest.

This is the principle that guides MoneyWorks4me and if you agree that this should guide your investing you should become a member of our Sensible Investing Club. Members will get access to valuable information, content, insights and tools to imbibe the disciple of sensible investing.

Read the next article to know How a Sensible Investor uses the Wealth Building Formula to his advantage

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Raymond Moses - Founder, MoneyWorks4me

Raymond Moses - Founder, MoneyWorks4me

Founder- Moneyworks4me, has over 36 years of experience. After graduating from IIT Kanpur in 1983, he worked with Hindustan Unilever and Castrol. He is the Founding Director of The Alchemist's Ark-a business consulting, training and e-learning company with many market-leading companies as clients. Since starting Moneyworks4me in 2008, he has worked to make investing advice effective, transparent, simple and accessible to Retail Investors.