Apple Investing …
If I give you 10 apples to consume, what will you do?
There are couple of options, we can think of.
1. If you are super hungry, you will eat all the 10 apples.
2. If you feel full after eating 2 apples, you will save the rest of the apples for the next day or donate to someone who is hungry.
If you decide to save few apples so that you can eat later, you are left with couple of more options.
1. You can leave the apples in the room and those are good to be eaten in next 2–4 days.
2. If you are mindful of keeping them for more than 2 weeks, you will refrigerate.
This is how, smart people like you and me approach the situation when offered 10 apples.
But, wait. There are few more options to explore which has never crossed our mind till date.
What if I eat 9 apples, and plant the 10th apple. I can understand what does your mind think now? Why can’t I eat all the 10 apples and plant the seeds from those 10 apples. If you think so, you are GENIUS.
Let’s give rest to the genius mind and behave as a normal person.
I repeat,
What if I eat 9 apples, and plant the 10th apple!!! The planted apple seeds can grow into an apple tree and give us 100s of apples for free in the future.
What if I eat 8 apples, and plant the 2 apples!!! You get more free apples.
What if I eat ONLY 2 apples, and plant the rest 8 apples!!! You will have 1000s of free apples.
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This is called INVESTING!!!
Let us take the first scenario of planting the seeds from one apple. The probability of the planted apple seeds turning into a tree is nominal. It can turn into an apple tree or seeds can completely go dead.
In order to increase the probability of having an apple tree, we will plant seeds from 2 apples. This is called DIVERSIFICATION !!!
At this moment, I hope you understand on what topic I am leaning towards. Yes, it is all about INVESTING and achieving Financial Independence.
As a member of the middle class or a working class or a salaried class, whatever name given, we are entitled to work all day throughout our life. We live paycheck to paycheck and never achieve financial
independence. We panic when we lose our job. We can’t survive without a job for atleast 1 month.
Living paycheck to paycheck is nothing but eating all the 10 apples when offered to us. Take a moment to revisit the first 2 lines of this article.
I believe you are one among few smart people who don’t spend all the money you earned. You save money in your bank account. This is similar to keeping the apples in the refrigerator. The money will help you
for few months when there is financial emergency. Mind you, you have not achieved or you will not achieve financial independence with the money saved in your bank account. Consider the inflation rate per year
and the effects it can have on our money.
So, in order to achieve financial independence the only option we have is INVESTING!!! INVESTING!!! and INVESTING!!!!
Ok, at this point, we have decided to invest. But, we will explore some of the challenges that accompanies investing.
Let us go back to our apple example. We know that planting apple seeds is going to give us more apples in the future. But, planting the seeds alone does not guarantee an apple tree. There are various controllable
and uncontrollable metrics to consider.
Controllable factors are choosing the correct soil, watering the seeds regularly, fencing the plants from animals.
Uncontrollable factors can be heavy rainfall, tornado or extreme draught that can severely affect the growth in negative way.
Likewise, investing has it own challenges. The money we have can be compared to the seeds. Choosing the right stock is in our hands. But, market volatility is something we can’t control. However, if we have
enough knowledge and education about investing, short term volatility will not affect us. We should always aim for the long term fruitful returns.
Happy Living!!!
Happy Investing!!!!
