Continuity – How Boring?

Imagine at the age of 60, you own a flat in a tony apartment and feel proud of what you have achieved in life. You realize that your neighbour is someone in the late 20s. All your sense of pride goes off in a moment!! While, you have toiled all your life to achieve this, this youngster has achieved this feat in such a short span of time.

While your continuous and boring professional life enabled you to achieve this; your neighbour, a high-stakes notorious gambler has amassed his fortune by taking aggressive and bold bets.

Now, would you want to trade places with him?

Perhaps not, because until the time you realized that he was a gambler, your outlook was based on what was visible to you – the outcome, rather than the process – typical Outcome bias!! It is the process rather than the outcome, which plays a very important role in determining success.

Also, if you would have considered alternative paths or probabilities which could have happened to your young rich neighbour, but did not materialize.

Most of the alternative paths are invisible; hence you contemplate them very rarely.

There are very high chances that your young neighbour, by the time he achieves your age might go belly-up and could land up in jail.

It is important to realize that while continuity takes time and often does not give the adrenaline rush and is obviously boring, it is something which is worth consideration.

After all, if you can compound your wealth continuously at 15% CAGR over the next 30 years, your wealth ends up becoming 56x of the amount you started with. Even Einstein quoted – “Compound interest is the eighth wonder of the world.” Being continuously patient is a very important virtue to achieve financial success.

A company which has grown its Free Cash Flow @ 15% p.a. CAGR since 2002 till 2018 has been able to increase its market capitalization by 20% p.a. CAGR over the same period. So much so for being continuously invested in ITC since 2002 – you would have been richer by 17x of your original wealth had you invested in 2002. (BTW, this does not include dividends!!!).

While being patient and investing seems to be an easy task, however, with the continuous blabber of your peers, friends and experts, you tend to get influenced in a wrong way.

While sitting on one’s ass and waiting to invest in businesses at the right price is boring, so much money for being continuously boring! I am loving it!!!

Disclaimer: Please note that these are my personal views. I am NOT a registered Research Analyst as per SEBI (Research Analyst) Regulations, 2014. All investors are advised to conduct their own independent research into individual stocks before making any decision. In addition, investors are advised that past stock performance is not indicative of future price action.

 

 

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