The Gorillas of Investing

Amar Pandit , CFA , CFP

The headline might seem a little off but there is a context that you will appreciate.

Before I get into the details, I would like you to watch this video. (Watch it first and then read the rest of the post)

As you can see from the above video, most people miss the gorilla while watching the video for the first time. If you have seen the video before and fixated on the gorilla, I can assure you are likely to miss the other details.

Did you miss any?

The finer point is that when we are focused on something, we are likely to miss other important things. This happens all the time in the world of investing.

These are the 3 gorillas in the world of stock market investing :

  1. Tomorrow will be better than today:
    The world will be in a better place in the future than it is in the past. Think living in caves, riding horses, advances in science and the progress humankind is making.
  2. The Stock Market generally goes up in the long run.
  3. It is normal for the stock market to go up and down in the short term and it will.

We understand this analytically or logically just like we understand Buy Low and Sell High.

However, we must understand these gorillas at a visceral level. We must understand it in our emotions, behaviours, and actions.

While in the video, the gorilla passed by clearly; in our daily lives, the above 3 gorillas never pass by so clearly and there is no one to remind us of these 3 gorillas (except your Real Financial Professional).

Those who do understand these 3 gorillas emotionally are what I call as Emotionally Intelligent Investors. These are the types who generally succeed in investing.

As I had written earlier,

If it is so simple, why do most people miss it?

The same reason why most cannot follow the 4 Golden Words of Fitness “Eat Less and Exercise”.

This is because there is a conscious attempt to distract us.

The focus is shifted from these 3 gorillas to things such as:

  • Breaking News
  • Markets are too high
  • Interest Rates going Up, Federal Actions, RBI Statements on interest rates
  • What’s happening in the World
  • Campaigns and Advertisements asking you to trade – One look at the IPL advertisements these days and you cannot miss these gems. Some are from Trading Platforms which make investing feel like a Game and some advertisements are literally Betting on Games. It is difficult to distinguish between the two. Just add a disclaimer at the end “Be Responsible while doing this” and cover your backside.
  • Advertisements showing how this homemaker has made millions by trading in Forex
  • Planted stories on how easily people are making money. A cardinal rule to remember is that money quickly made feels almost like Free Money. People generally tend to take more risks or commit more mistakes with such money than with the money that has been made over a period of time.

We get so caught up in these daily news cycles and how quickly someone else is getting richer that it is easy to lose sight of why we are really investing.

What should really matter to us is our data and our financial lives.

While we seem to be focused on other things such as Politics, GDP, Interest Rates, Stock Markets and so on, most of the time we miss out the most important Gorilla in our life “How much is ENOUGH?”

The Gorilla Experiment is a very powerful one and is relevant not only to investing but to our careers, relationships, and lives.

Ask yourself “What are the Gorillas that I am overlooking?

Reflect on it.

I assure you that the answer to this question will be eye opening if not life changing.