The stock market is well known for its unpredictability and volatility. We have also heard about different people who have profited or hurt by the stock market. Yet, perhaps, our lives are very much like the stock market.
One well known fact of the stock market is that it has the highest annualised return on investment (ROI) among all the different types of investments, to be exact, around 7%. However, one must keep in mind that such ROIs are only possible if you hold the stocks over the long term. The short term volatility of the stock market borders on notoriety with countless examples of people who have burnt their fingers and possibly lives as a result of such volatility. A short term gain in the stock market may not be permanent. Conversely, a short term loss does not bode ill for one who has the discipline, courage and commitment to hold the stock and rough it out. Similarly, in life, everything must be planned for the long term. If you only plan on a short term basis for your life, chances are that you life is going to be as volatile as, if not close to, that of the stock market. One must not be disappointed with seemingly little gain or even loss as a result of a new endeavour or action. Rather, such situations should be treated as part of short term volatility in life. Instead of panicking, remain disciplined and committed to your action and you will soon start to reap your ROIs as a result of your actions.
Another significant feature in life that is notable is the fact that not everyone has a similar set of starting circumstances. In short, life is not fair to everyone at the start. Drawing from the stock market analogy again, some people may have more starting capital, some may have simply entered the market at the wrong time while some others were unlucky to hold stocks of companies who have folded. In life, we see people of different backgrounds going into this big arena called society trying to eke out a space for themselves. However, what happens during your life and how you end it is determined by your ability and intelligence. Warren Buffet certainly did not start out having a billion dollars worth of capital for him to invest. In fact, he started out small, but through his sheer investment acumen, he managed to create an investment portfolio which many can only dream of. Similarly, your background and starting point do not matter. What matters is how you take advantage of your surroundings to fulfil the objectives in your life.
Lastly, in life, just like investing the stock market, everyone has his or her own objectives. Some may opt to just go for that quick buck (speculators) while some may opt for long term cash flow (blue chips, anyone?). A group of investors prefers in diversifying their holdings (investment funds) while some may just decide that specialisation is their favoured path (holdings). Whatever one’s objectives may be, it is important to keep in mind that almost everyone has a distinct set of objectives in life. Remember, not everyone is a hedge fund. Some may prefer to be a majority shareholder instead. In life, one person may want to be financially-gratified while another may just be contented with happy family life. In all cases, there should be no pressure on one to follow the ‘general’ trend or fad just because ‘everyone is doing it anyway’. Instead, it will be more appropriate to sit down and think about one’s objectives and chart a path to fulfil each of these objectives. Following the crowd may not be the best option at any point in time. The stock market is ridden with examples of herd instinct destroying the fortunes of large groups of people who preferred following to thinking rationally. Also, as an added disincentive, blindly following the crowd may result in numerous short terms deviations from an ideal course of path you should take. In the end, these deviations may result in the disruption of your strive to achieve your long term objectives and you may even end up not achieving your long term goals.
Certainly, there are many lessons which we can draw from the stock market regarding life. It can be almost certainly said that the above mentioned points are not exhaustive and there are certainly many more other areas from which we can learn lessons about life. The stock market, however, seems to be a microcosm of the macrocosm of the society we live in. Perhaps, the stock market may just reflect basic human nature for every interaction on the stock market has the imprint of human characteristics, such as greed and complexity, and such interactions will only serve to accentuate the imprints of complex human behaviour, currently existent in society, in the stock market.
shermon blogged @ 10:25 pm
name: ong kah han shermon
b-day: 12 feb
pri sch: pei chun public school 1996->2001
sec sch: raffles institution 2002->2005
jc: raffles junior college 2006->2007
bmt: cougar coy, platoon 3, 01/08
ocs clm: delta wing, platoon 1
ocs svc term: air wing, flight 3
ocs pro term: afs, c3 wing
unit: ???
ccas: rinpcc, ricsc, rj club alchemy, recas