A man insulted a sage sitting beneath a tree. And the sage did not respond, the man insulted him again, but there was still no response. After a few hours, the man grew tired and asked the sage, “I’ve been insulting you for hours, and you haven’t gotten angry?” “I haven’t accepted your insult,” the sage replied. “But you heard every word,” the man said. “I don’t need your insult,” the sage replied. So why should I hear it? It’s still with you.” “How would it stay with me?” the man said. “If you give someone coins and that person refuses to accept them, where will those coins remain?” the sage replied. “It would stay with me,” the man said. “It’s the same with insults also,” the sage explained. The insult will stay with you because I have not accepted it from you. So, I have no reason to be angry.” The man expressed his regret.
Morgan Housel writes in his book ‘Psychology of Money’ that “investing is not the study of finance.” It is the study of how people handle money.” Those who have created wealth through investing are well aware of this. While the market experiences bull and bear cycles, investors experience emotional cycles of greed and fear in addition to herd behavior. They buy when the majority of people are buying and sell when the majority of people are selling. When markets become volatile and fear levels rise, the real challenge begins. It’s as if the investors feel ‘insulted’ with the volatility and decide to leave the market. In retrospect, regardless of whether the ‘insult’ occurred in 2008 or 2020, we should not ‘accept’ it and continue to invest for the long term. True wealth creators, rather than those who are good at picking stocks or funds, are those who can control their emotions and stay invested for several decades.
