Follow the Owner, Not the Dog
On a Sunday morning, fund manager based in New York, Ralph Wanger takes his excited dog for a stroll. He follows the same path for the stroll which he followed for years. Starting at Columbus Circle, Through Central Park, ending at Metropolitan Museum. All the years he has been doing this exercise without noticing one thing which he noticed on one fine day.
In his fitness tracking device, he has walked around 1.5 miles on average while the dog has walked more than 2.5 miles. Later that day he realized the reason that the dog was darting randomly in every direction. Both the owner and the dog headed the same direction but the dog had multiple focus at one time while owner had one focus, Metropolitan Museum.
What is astonishing in investment psychology term is that almost all of the market players, big and small, have their eye on the dog (markets), and not the owner (businesses). Investors gets distracted by secondary or peripheral factors while emphasize should be on to focus on the source of information.
For example, in today’s world, many investors have their investment ongoing as well as EMIs ongoing for various expenditures. If the focus of investor shifts to get debt free within certain period and he is firm on that than he might cut down his expense, pay the debt from surpluses or even withdraw some investments to reduce debt. Now that is ‘Following the Owner’s strategy.
While there are also set of investors who are continuously in debt. They consume latest market trends, have expensive lifestyle. Their focus continuously shift to please their own selves. Now this is somewhat ‘Following the Dog’ strategy where they follow random direction as market changes.
As Shalibhadra, we make sure that every investor follow the owner and remain focused on building enough corpus to sustain good lifestyle not just for present but for future as well.
Nishit Siddharth Shah