Long, long ago, there lived a monster in a tiny village. The villagers were terrified of it and felt that their hamlet was cursed to have such a creature living in their midst.
Several men tried to fight the monster. One man attacked it with a sword, but the creature grabbed the weapon, and almost magically pulled out another sword—twice as large, twice as sharp—and cut the attacking man in half.
At another time, a villager set off with a huge wooden club to clobber the monster. The monster responded by slamming him with a wooden club twice as heavy as the one he had brought along.
On yet another occasion, a villager tried to set the monster on fire. But the monster merely opened its mouth to swallow the fire; and in return, spewed leaping flames that roasted the poor man. Scared by these incidents, the village folk gave up trying to fight the monster. They began to believe that this was their lot and they would have to learn to live with it.
Then, one day, a little boy said he would go and vanquish the monster. The people were surprised, but despite their scepticism, went along to send the little boy take on the monster. As the boy looked up at the giant, the monster just flared its nostrils and glared back. The people were frightened. The little boy took out an apple and offered it to the monster. The monster grabbed it, popped it into its mouth, and then thrust its clenched fist in front of the boy. Bam! As the fist slowly opened, the people were astonished to see that it held two delicious apples. Twice as red and twice as large as the apple the boy had offered.
There is a lesson for all Equity Investors.
If we view the market as a monster and try to outsmart it, the market will invariably come back to hurt you. But if you view the market as a helpful friend and treat is with patience like we would treat a friend, it will return your investment many times over.
People who view the market as a game to play with the aim of outsmarting it are called speculators.
Those who treat the market as a long term friend and invest their patience and money in it are called investors.
