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.
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.
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
|
Date |
Closing |
|
01/01/2010 |
16,357 |
|
01/12/2011 |
15,454 |
|
01/05/2012 |
16,218 |
|
01/12/2015 |
26,117 |
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.
|
Date |
Closing |
|
01/01/2015 |
29,182 |
|
01/05/2016 |
26,667 |
|
01/04/2017 |
29,918 |
|
01/12/2020 |
47,751 |
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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