Learnings from the Chinese Bamboo about Equity Investing


The Chinese Bamboo Tree is often used as an analogy to better understand success.

With a tree the usual process is to plant a seed with fertile soil and make sure it gets a constant supply of water and sunlight.

With time the seed will transform in to a plant and eventually a tree that bears you fruits.

A Chinese Bamboo tree is unlike other trees though, the process is unique and a life lesson in itself.

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How long does a Chinese Bamboo grow?

A Chinese bamboo tree takes 5 years and 3 months to grow up to 80 feet.

There are other trees that grow faster and longer, so what sets the Chinese bamboo tree apart?

Even though the tree takes more than 5 years to grow, any tangible growth can only be seen after the 5th year.

Meaning up to the 5th year no real visible growth is visible.

So you could say any growth took place only after the 5th year, in those 3 months right?

Wrong !


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Explaining the growth process of a Chinese Bamboo tree

For the first 5 years only a sprout is visible and nothing more.

Despite that, one needs to constantly water the seed without fail on a daily basis.

If at any point though, if you stop watering the seed because the growth signs are not visible then the tree will never grow.

During these 5 years the tree is definitely growing but not growing in the more traditional upward way.

It is strengthening and widening its roots, making sure the foundations are strong for the future upward growth.

Once the foundations are strong, it does not matter whether you build a 5 storey or a 50 storey building.



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Explaining the Chinese Bamboo connection with Equity Investing

Just as growth with the Chinese bamboo tree is not instant and visible from day one onwards, neither is the case with equity investing.

With equity investing just like the Chinese bamboo tree, you need to have your fundamentals and keep your faith in the initial few years when you may not see much growth.

Remember that your growth even though may not be seen in the initial few years, it cannot be seen later on too if you do not continue to stay invested in the initial few years.

If you invest well and stay invested, you will eventually see returns in the future.

Just as the bamboo tree needs regular watering, you need to invest regularly too.

Just as the bamboo tree requires patience for the first few years, so does your equity investments.

Just as you do not lose faith when you do not see any tangible growth with the bamboo, you should not lose faith in your investments when you do not see meaningful returns in the first few years.

The Chinese bamboo tree is testament to what faith, patience and discipline can result in, this is true for your equity investment too.

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Sensex and the Chinese Bamboo












Sensex  grew around 10,000 points from 1st January 2010 to 1st December 2015 but the growth was never linear.

It had its fair share of downs too which can be inferred by its closing on 1st December 2011 and 1st May 2012.

It is here where you need your faith the most and continue with your regular investments.

It was easier to invest on 1st January 2010 & 1st December 2015 than it was 1st December 2011 & 1st May 2012.

It is easier to have faith when you do not need any than to have it when you need it the most. 

It is in human nature to predict the future in line with the present.

During an economic crisis or war humans are pessimistic about the future whereas a recently rewarded lottery winner is more optimistic.

We expect things to be in the future exactly as they are now, this theory only works in extreme cases though.

A similar case can be made of the Sensex for the period from 1st January 2015 to 1st December 2020.













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Patience and Equity Investing

Patience as a virtue cannot be taught, it can only be learned.

In an era of instant gratification and quick fix, patience does seem like a misfit and yet it is as valuable as it has always been.

We often complain of time passing by too quickly and yet baulk at the thought of waiting for 5 years to see any meaningful returns from your equity investments.

Would it not be easier to wait for 5 years when time is already passing too quickly?

It should be and yet investors complain of it being too long a period to stay invested in.

Understanding time, the workings of it and our relationship with it should provide us with a reasonable explanation.

A plank of a minute seems longer than an episode of your favourite tv series, this is because doing a plank takes significantly more effort than watching an episode because of which time seems to move slower when you have to exert more strength.

Philosophically speaking the hardest thing in the world is to merely exist without any reference, practically speaking the hardest thing to do is absolutely nothing which is why most people never make it past the first few attempts of a meditation routine.

Equity investing is about investing regularly in the first few years and having faith that your efforts will bear fruits after a few years.

Where most investors go wrong is in doubting their decisions before a considerable amount of time has passed by and being unable to just sit tight.

If you sow the seeds of doubt you will be doubtful, if you sow the seeds of faith you will be faithful.

What you sow is what you reap, seems an easy concept but difficult to implement cause human behavior is anything but simple.

It is easy to invest regularly but when it comes to waiting to seek returns on your investments, sooner or later many people lose faith.

Mind you, in an era of instant noodles the biryani still holds value for money!  

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Disclaimer : While due precaution has been undertaken in the preparation of this article, The Mutual Fund Guide or any of its authors will not be held liable for any investments based on the above article. The above article should not be considered financial advice and has been published only for your perusal. Due credit has been given in case wherever required, in case you feel any part violates any rights then do get in touch with us and we shall get it duly removed.  
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