Aihrus

Good old Aesop had wisdom in abundance. He has a lesson for all of us in a tale in which there are two players. There is a hare which as anyone knows can run really fast. The other is known for its very slow movement: A tortoise.  As is his wont, the hare always makes fun of the tortoise and speaks derogatively about his lethargy and lack of enthusiasm. There is always a limit to how much one can take. And, the tortoise reached his limit soon and challenges his tormenter to a race.

Overconfidence did the Hare in

As luck would have it, the overconfident hare starts fast enough to complete a good portion of the course, decides to take a nap and also have his breakfast of his favorite cabbages. Belly now full, he again goes back to another bout of sleeping. The hare, meanwhile, dutifully drudges along without any let up and has almost reached the finishing point. The hare wakes up only to find the hare has almost made it to the finishing line. He instantly takes off at his maximum possible speed but alas, the hare is already there! The disgraced hare slumps next to the proud winner who is all smiles and utters one of the most enduring wisdoms: Slowly does it every time”.

Modern Day Hare and Tortoise

Why have we narrated a fable you might already know? You can see that the story has a valuable lesson for a modern day investor. An enthusiastic investor, in his eagerness, may choose to put his money where he thinks the returns will sure be significant, going by the trends in the marketplace.

Let us say that the U S stock market is the hare and a portfolio that is diversified and risk managed is the tortoise. Let us assume that the underlying securities of the portfolio are equipped to offer enough potential that can reduce stock market volatility but will be subjected to a lesser term total return potential. Like in the fable, stock market and the portfolio may run neck and neck but it may happen many times unlike in the tale. The hare may make many attempts to catch up but in the end, the tortoise always will win in a manner that may not be very visible but will surely be discernible in the end.

The Winning Tortoise

Most investors are given to panic if there is a slide down in market volatility and, as a result, they incur substantial losses. The emotionally-driven decisions are not likely to be taken if the investors know how the tortoise may be down but never out. The slow but steady progress their investments make compared to the sudden upward swing that a hare type of investment makes may not seem spectacular but there is always the possibility of the hare losing out in the long run. The tortoise, on the other hand, will always move forward and reach its goal, downward volatility notwithstanding.