Cucumber and Pickled
I know this sounds odd for the headline of an investing blog post. I promise though I have a point to make, so hang on.
Adam Alter in his book “Irresistible: The Rise of Addictive Technology and the Business of keeping us Hooked”, makes an interesting point about Cucumber and Pickles. He says that your brain is like a Cucumber. A part of it then becomes a pickle. Once it becomes a pickle, it is impossible to go back to its previous state. Think of smoking as a habit. Now imagine your life before and after smoking. Before you started smoking, let us assume your brain was like a cucumber but after you started smoking, a tiny part of your brain becomes pickled with the smoking habit. I hope I have given a context for this concept of Cucumbers and Pickled.
Now think of investing and investors. A Tiny portion of an investor’s brain has been pickled with Greed. Another Tiny portion has been pickled with Fear while, yet another portion has been pickled by the Media Financial Porn. On the other hand, some investors have been pickled to buy when everyone is panicking. Pickling is in short all about forming Habits. John Maxwell’s quote fits well here “You don’t choose your Future; You choose your Habits, and they decide your Future”.
If this is so, what are the habits to develop as an investor in the equity markets or what should you pickle your brain with?
The wise have pickled their brain with the following and hope you find it useful. There is actually no rocket science behind this just like there is no rocket science behind the mantra of staying fit “Eat Less and Exercise”. The devil lies in your ability to implement, behave, follow a process, and finally review and course correct.
- It is almost a cliché now, but it is pure gold – Time in the market is more important than timing the market. A wise investor pickles her brain with this mantra. Stay Invested are the 2 words. She knows that she has invested for the next 2 decades and not for the next 2 months or 2 years. As I have written earlier too, a lot of people exited the markets for different reasons. Some exited out of fear while many tried to time the markets as it went up. Most of these people are waiting for corrections to happen. When they do happen, they wait more, and this generally leads to suboptimal investment outcomes.
Carl Richards has written a wonderful book on this called the Behavior Gap. Behavior Gap is nothing but the gap or difference between investment return and investor return. This Behavior Gap has been quantified in various studies in the US. Based on what I see in India, it is very high for most investors.
To give you an example, Investor “A” got out of the stock market when the Sensex was at 35000 in May 2020. Even if we take the Sensex at 50000 today, this Behavior Gap has cost the investor 43%. You may say the Sensex can go back to 35000 in the future and yes it can (no one knows), however there is no assurance that the investor will invest at that level. Thus, the best course of action for those who have invested for the next several decades – is to stay invested.
- Compounding takes at least 2 decades to show results. Thus point a. is a necessary factor for Compounding to work and deliver the results. Time creates Money and it is worthwhile to pickle our brain with it. Start Early, Let Compounding do its Magic and Never interrupt Compounding unnecessarily is what we need to pickle our brain with.
I digress a bit here, but it is important. If you were planning to invest for your child, start investing when you start planning the child. The next best time is the day your child is born.
In my last Nano, I mentioned about the Rollercoaster ride. Investing in the equity markets will be a rollercoaster ride. Pickle your brain with this biggest truth.
- Buy more if they have surplus liquidity or focus on their work. Some even take a deepBuy more if they have surplus liquidity or focus on their work. Some even take a deep breath and go for a nice walk. breath and go for a nice walk.
- Do not pickle your brain with breaking news. There will be so many of them over the next 20 years. You can be successful by avoiding stupidity rather than attempting to be super smart.
- Avoid pickling your brain with tips. This is a very dangerous one and you will do well not only financially but mentally and emotionally by avoiding this one.
These are some simple yet powerful things all of us can implement. There are many more and I am sure you can come up with some.
Pickling your brain is almost like writing an algorithm that is now on Autopilot. You do not have to think every time. I am going to share some of my Algorithms in a simple format in a future post called “Decir”. Watch out for it.
It is naïve to think that our brain will operate like a cucumber and it is likely to get pickled with our habits. Let us all be aware of this and utilize this to be the best version of ourselves. John Maxwell has written “If you need to change your life, change something you do daily”. In the spirit of this post, I read the line as “If you need to change your life, pickle your brain accordingly”.