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Friday, 11 March 2011

The tortoise and the hare – to invest or save?

Whether it’s better to suffer the risks and ups and downs by investing our nest eggs, or by saving it in a savings account, we can escape the emotional roller-coaster?

The story of the tortoise and the hare is well known. The hare fell asleep, made the mistake of underestimating the tortoise, and slow and steady won at the end of the day!

Like all fairy tales, if only that’s the end of the happily ever after story…..

What if we have many more races ahead?  Not just one race?

Putting money in a savings account is “safe”.  Like a tortoise, compound interest will accumulate into a nice nest egg eventually – provided the savings interest is more than inflation, and if you have a long enough time frame.

How many years does it take for our nest egg to double if we get 1% compound savings interest?  If only we can live as long as the tortoise!!! 

Yup, safe and slow is more costly than you think…..  And “safe” does not mean a lot if the bank went bust. Never? Tell that to Iceland banks’ depositors…….  

What if the hare is able to learn from his mistakes? In the next race, surely he won’t make the same mistake twice? That he did, but the impatient hare makes other mistakes:

a)      Taking short cuts through the woods entails certain risks – foxes and wolves like to lurk in the shadows.

b)   Running in the open road will invite the attention of hawks and eagles – the hare never get any breaks!

c)      If the alternative route recommended by the snake seems too good to be true, it frequently is!

It’s all seems so unfair to the hare.  And that applies to investing. But the hare knows that what doesn’t kill it will only make it stronger. And the knowledge that if a fire breaks out in the forest, the hare will make it out alive. Not so sure about the tortoise though…. His shell can only protect against predators – not fire….

So how?

The question before we run the race is: who am I? Are we the hare or tortoise? A tortoise should be a tortoise, and a hare a hare.

The trouble starts when we try to be something we are not.

The tortoise can hide in his shell when danger comes – that the hare can’t! If a hare tries to be steady and slow, he is dead meat!!!

Imagine a tortoise ditching his shell so that he can be more nimble and quick as the hare?

Hey! This story is useless! If we can’t change what we are, then what’s the point?

Ah! But we are human beings – not hare or tortoise.

What a man thinks, he becomes.


3 comments:

  1. Hi SMOL,

    Great story :)

    Slow and steady wins the race? Nah, more like miss the race, hahaa

    ReplyDelete
  2. Hi SMOL,

    Life is a marathon never ever will be 100 meter sprints. And the race of life is not win by the strongest, the fastest, the smartest but the most adaptable or flexible.

    So in investment if one practise "Buy & Hold" trading strategy(from buying to the next bull market) compare to daily/weekly trading strategy, I consider the former using "tortoise investment strategy". Not hit and run, hit and run strategy like daily/weekly trading. Some may prosper. But how many? Even the very few sucessful ones will burn-out very soon.

    ReplyDelete
  3. La Papillion,

    Ha ha! Yes, we must get to the starting line on time too!


    Temperament,

    Yup, boring is good!

    ReplyDelete

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