How ‘Not’ to Kill The Goose That Lays the Golden Eggs?
There’s a famous story from Panchtantra (a children book) called- The goose that lays the golden eggs. I am sure that you might have heard this story. Anyways, let me briefly summarize it:
Once upon a time, a man and his wife had the good fortune to have a goose which laid a golden egg every day. Lucky though they were, they soon began to think they were not getting rich fast enough.
They imagined that if the bird is able to lay golden eggs, its insides must be made of gold. And they thought that if they could get all that precious metal at once, they would get mighty rich very soon. So the man and his wife decided to kill the bird.
However, upon cutting the goose open, they were shocked to find that its innards were like that of any other goose. Thus the greedy couple lost both the goose and golden eggs and became poor again.
The end is pretty sad, right? How can someone be so stupid to kill the goose that laid the golden eggs?
However, this happens every day in the stock market. Yes, there are tons of people who find these goose that lays golden eggs, but instead of keeping, they kill the goose.
In this post, we are going to discuss why you need to control your ‘greed’ and how ‘not’ to kill the goose that lays the golden eggs.
The Goose that lays the golden eggs:
First of all, you need to understand what I’m referring to the term- goose that lays the golden eggs.
Here, goose means multi-bagger stocks. Multi-baggers are those stocks that give multiple times returns over a stretched period of time. For example, a stock that gives 50 times returns is called a 50-bagger. Another stock that gives 10 times returns is a 10-bagger stock.
Few famous stocks that turned out to be multi-bagger in past are Eicher Motors, MRF, Avanti Feeds, Rain Industries, Symphony, Page Industries etc. These are the goose that laid the golden eggs if you have kept them for a long time.
How ‘Not’ to Kill The Goose That Lays the Golden Eggs?
The goose that lays the golden eggs are not rare in the stock market. Every now and then, you can find these stocks.
However, the problem is that most people behave in a similar manner like that of the greedy man and his wife who killed the goose. Instead of nourishing the goose, people chose to take the superfast trackway and ends up killing that goose.
Here are the 3 steps that will help you to ‘not’ kill the goose that lays the golden eggs:
1. Invest for the Long-term:
Every stock investor who made inside the list of top-500 richest person in the world is a long-term investor.
Warren Buffett, one of the top 3 richest people in the world, understand the importance of long-term investing and has been following the same principle for over seven decades now. Here’s what Warren Buffet says about long-term investing:
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“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.”
“If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.”
When you are investing for long-term, you are giving the goose an opportunity to keep giving the golden eggs.
Most stocks take 3–5 years to become a multi-bagger. That’s why you need to have enough patience to hold that stock for the long-term. Moreover, if you want to take benefits of their true potential, they remain invested for 10–12 years.
Here’s a stock chart of Eicher Motors. In the last 10 years, it has given a return of over +10,500%- a real goose that laid the golden eggs.
Now, I have been investing in stocks for over three years now. However, I understood this strategy to not kill the goose soon enough. There are stocks in my portfolio which I haven’t sold for over 2 years.
Moreover, I’m planning to keep most of my stocks for the long-term. I’m 23 and hence I can easily hold these stocks for over 8-10 years without worrying about anything. Although many stocks in my portfolio are not-so-hidden gems (for example, Yes Bank, Titan Company, Venkys, Ruchira Papers, NOCIL etc), stills they have given good returns. Anyhow, I’m not selling these stocks in a short frame because I do not want just the golden egg. I want to keep the goose as long as it is capable of laying the golden eggs.
(Disclaimer: The stocks discussed above are used just for an example and I’m not recommending them. I bought those stocks when they were cheap and the valuation might have changed by now. If you are planning to invest in those stocks, then study them properly or take the help of a financial advisor.)
2. Do not book profits early.
“Time is the friend of the wonderful company, the enemy of the mediocre.”
Suppose you have found the goose that lays the golden eggs. However, just after it gave it its first golden egg, you decided to sell the goose. You believe that you’ll get good money by selling that goose immediately. Sounds stupid, right?
However, this is what millions of stock investors do daily. To book a profit of 30-40%, they are ready to sell the stocks that have the potential to give +1,000% if they hold it for the long-term.
Do not book profits early. Don’t get easily satisfied with small profits. It takes a lot of time and energy to invest in stocks and you deserve to get big profits. Delay the instant gratification.
3. Have patience
“Successful Investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can’t produce a baby in one month by getting nine women pregnant.” -Warren Buffett
If you have understood the story of the goose that lays the golden eggs, the lesson from that story was to have patience. Even though the man and his wife had a goose that lays golden eggs daily, however, they weren’t patient enough. And that leads them to failure.
Patience is the key to successful investing. If you can’t hold the stock for few years, then do not invest in stocks. In short-term, there would be thousands of fluctuations in the market. Nevertheless, you need to have the patience to hold your goose.
Finding a goose that lays the golden eggs is just not enough. You also need to hold that goose as long as it can give you the golden eggs. Here are the key takeaways to learn from this post if you do ‘not’ want to kill the goose that lays the golden eggs:
- Invest for the long term.
- Do not book early profits for short-term gratification.
- Have patience.
Let’s end this post with an amazing quote on behavioral finance:
“The stock market is a device for transferring money from the impatient to the patient.”
– Warren Buffett
That’s all. I hope this post is useful to the readers. Happy Investing.
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Hi, I am Kritesh (Tweet me here), an NSE Certified Equity Fundamental Analyst and an electrical engineer (NIT Warangal) by qualification. I have a passion for stocks and have spent my last 4+ years learning, investing and educating people about stock market investing. And so, I am delighted to share my learnings with you. #HappyInvesting