Over Obsession of Protection of Money

There was once a farmer who went through 3 years of poor crop harvest for various reasons. Sometimes it was bad weather, sometimes it was soil conditions that did not suit the crop, the reasons were plenty, but the result was poor output and meager income. His friend from another village counseled him to grow grapes – demand for grapes was booming from the fast growing wine industry, and he himself was making a lot of money by growing grapes.

The distraught farmer decided to take his friend’s advice and set up grapevines in his farm. He prayed long and hard to God to give him perfect weather and soil conditions to enable him to get a bumper yield. God was impressed with his devotion and granted him his wish. God assured him that his farm would have excellent weather conditions, good rainfall and supportive soil conditions – just the way the farmer wished for.

The year rolled on, and the farm got the absolute ideal conditions that the farmer had prayed for. The grapevines were growing healthy and strong. When harvest time came, the farmer, to his utter shock and dismay saw fantastic plants, but very little grapes on them. He had never seen a healthier looking vineyard than his, but was dumbfounded that it hardly produced any grapes.

His friend came visiting him, after successfully harvesting yet another bumper crop of grapes. The hapless farmer narrated his story to his successful friend, who took one look at the vineyard and said, “my friend, only you are responsible for this mess”. He then went on to explain that vineyards give excellent grapes when they struggle for their needs. When the top soil has less nutrients than necessary, when they don’t have abundant water, the vines grow long roots that go deep into the soil in search of water and nutrients. This makes the vines strong, which allows them to produce great grapes that make the best wines. Give a vineyard plenty of water, put bushel-loads of nutrients on the top soil, and what you will find is plants that have luscious leaves, but which are unable to make good grapes. Weak vines make leafy plants, strong vines make great grapes. By asking God for the perfect conditions to secure a great crop, the farmer made his vines so weak that they couldn’t do the job they were supposed to.

The friend then explained to the dumbfounded farmer: “If you want your son to be successful in life, what will you do? Will you keep him at home all day, for fear of exposing him to the evil world outside? Will you shelter him from everything possible that could hurt him? Will you stop him from playing, lest he get hurt? Will you not allow him to go to college in the city lest he go astray when he is away from you? Will that make him strong and able to take on the challenges that life will throw at him? Or will it make him so weak that he can never face any of life’s challenges? By trying to keep him safe and well protected all the time, have you helped him or harmed him?”

The farmer understood what his friend meant when he said that he alone is responsible for the grape crop failure. In his effort to provide the perfect environment, he actually weakened the plants so much that they could not deliver what they were meant to.

How is this story relevant to investing?

Most of the investors want their savings to deliver the best possible results for them. In their anxiety to protect their money from any loss, they opt for the safest investment avenues. They don’t lose money, but over time, the money that has been kept so safe, fails to do the job it was supposed to : which is protect their life style and help them meet their financial goals. This safe money has so little earning power that it completely loses the battle against inflation.

For savings to create wealth, these savings must endure some of the hardships that a good vineyard does. In enduring these hardships (volatility caused by equity investments), the portfolio becomes strong, is able to ride through market cycles and is ultimately able to deliver wealth creation – which was the main objective of the savings. Without pain, there is no gain. A portfolio that is always sheltered from volatility will always remain a weak one. A portfolio that has a healthy dose of equity, will no doubt experience difficulty in its growth phase, but will over time emerge strong enough to deliver high quality returns.

Just like we know that we must expose our children to life’s up and downs so that they can become strong and capable, just as a good farmer knows that he must allow his vineyard to search for water and nutrients to become strong and healthy . Similarly, savings that are kept totally protected and safe, sheltered from any form of market volatility, will grow up to be weak portfolios that will erode their purchasing power and reduce their standard of living.