Apart from theorising all we know about black holes today, Hawking also taught us some valuable lessons in investing. Read on to find out 4 investing lessons from the life of Stephen Hawking.
Stephen Hawking was born exactly 300 years after the death of great astronomer – Galileo. Best known for his research on the mysteries of the Cosmos, I came across his work when I read The Theory of Everything in 2007. A book in which he lucidly explains the complexity of our universe in a layman style.
The hypothesis behind the existence of our Mother Earth and Solar System. The theory behind the never-ending exponential expansion of the universe since Big Bang. The origin and fate of the Sun. The truth behind the not-so-black black-holes. And what not. In a fashion that even naive like me can understand.
What really amazed me was the fact that he performed all his research while living with a Motor Neuron Disease. That too for more than 50 years. A disease that killed the neurons that controlled his brain and eventually paralyzed him over a period of time. A disorder that forced him to lose his control over his muscles and made him wheel-chair bound since 1963. A condition that compelled him to surrender his ability to speak and write.
And yet, in a subtle manner, he communicated his ideas through a speech-generating device using just a single-cheek muscle. Regardless of all the challenges, he faced throughout, he described his theories and reached the masses by authoring numerous books and research papers.
The only thing I can say is: Where there is a will, There is a way. And the more I read about his life, the more I realise that his life journey comprises of many astute lessons that can assist us in becoming better investors. Listed below are the four major teachings that I find extremely relatable when it comes to investing:
Take advantage of the time you have | When he was 21, it was revealed that the nerves controlling his muscles were shutting the doors. The doctors gave him less than 3 years to live. Neither enough to celebrate the 24th birthday nor sufficient to earn his PhD degree. All he had was just 2.5 years to complete his research work on black holes and the age of the universe.
Without wasting a day, he looked at the 2.5 years that were ahead of him. He immersed himself in studying the subject and unearthed as much cosmic-secrets as he could in a time span given by his doctors. What a profound and valuable use of time!
Compounding is a concept, which when combined with time, produces magical results in the long-term. But many of us realise its potential at the later stage of our lives. Sometimes 40 Or even 50. That’s perfectly alright. Even if you start at 50, look at the next 20-30 years that lie ahead of you. The lesson is to take advantage of the time that we are left with. It’s an asset that we are naturally born with. Start investing systematically. Stay disciplined consistently. Slowly but surely you’ll reap the benefits.
Anne Scheiber started her compounding journey at a ripe age of 51. And yet she built a massive fortune of $22 million with just an annual pension of $4,000. She stayed invested even during the hard times when market tested her patience. Had Stephen Hawking not made the maximum out of the time that he was left with, he would have never revealed tons of information that we currently know about our cosmic universe.
Keep it simple | One of the reasons that made him a renowned scientists was his simplicity in explaining the intricacies of our cosmic world. No numerical calculations, no mathematical theorems. Just concepts that can be understood by reading his books written in plain English. He showed that, at one point, everything in our universe was centred at a single point. Which then shattered after a Big Bang. And eventually formed Stars, Galaxies, Planets, You, Me, and other forms of Nature that we are surrounded with.
On similar lines, the root of successful investing lies in approaching it with simplicity. Keep it simple by doing nothing when everyone else loses his/her cool and sells in an abrupt manner. Keep it simple by investing in businesses whose products we love to use in our daily lives. Keep it simple by selecting the stocks whose business models are extremely easy to understand.
Charlie Munger, the business partner of Warren Buffett, says, "Most investors don’t copy our model because our model is too simple. They believe that you can’t be an expert if it’s too simple."
Investing is simple. But not easy. There are many listed companies out there that use a simple business model to function, compounding their shareholder’s money slowly.
Yet a lot of us become a front-runner in a race to find the next-HDFC, ITC or Page Industries. We live with a mindset that what seems so simple will not produce magical returns in the long-run. And thus, end up chasing complexity in Futures & Options, Derivatives etc. where the odds of losing money are high.
One of the simplified strategies to build wealth is to invest through SIPs. Buy the same set of stocks or mutual fund units (index or professionally-managed) every month or so. And thus, you end up equalising the price. Does it matter who runs the country? No. Does it matter how the market is going to behave in the near future? Of course not. Does it matter when is RBI going to raise the interest rates? Not at all. The only thing that matters is India will continue to prosper in the upcoming decades. Believe in its growth story. It’s as simple as that.
Without worrying much about the things that are out of our control, keep investing. Keep it simple.
Continue learning | Despite having a limited time span, Hawking never stopped learning and exploring the new ideas that could help him in his research work. Even while having dinner with his family, he used to be silent and immerse himself in learning from the work done by other scientists.
Same holds true for us as investors. Read a lot. Newspapers, business magazines, books, articles. Whenever and whatever you can lay your hands on. Learn from the people in your network. Find out what are the surest things that are not going to change in the next 10 years or so. This way, you can come up with the relevant investing ideas.
More than that, continue learning about human behaviour. Learn about the psychology that works behind making money. After all, how much you accumulate is the consequence of how you behave during irrational times. The returns on your investments will automatically favour you if stay invested during harsh times and for a long period of time.
Don’t get discouraged by adverse conditions | This is one such profound message that I have acquired from his life. Never get bogged down by the unfriendly circumstances in life. When he lost his power to control his muscles at a very young age, he confined himself to a wheel-chair to move. When he lost his ability to speak, he used an artificial speech synthesizer to communicate his ideas to the world.
When the future looked bleak in front of his eyes, he looked at it with a new sense of opportunism. He never let the adversities of his life hamper his research work.
During our investing journey, we may encounter many such troubles that turn out to be bad for us. Market crashes, poor timings, buying at high valuations, bad decisions. The portfolios may start screaming in red.
But never let them affect the wealth creation journey. Look at the broad picture. Learn from the mistakes and vow never to repeat them.
Don’t rush to sell when a stock plunges. Find out the valid reason. Is it because of the deterioration in fundamental business? Is it because of some corporate governance issue? If none of these, sit tight. Do nothing. Don’t get discouraged by seeing your portfolio in red. If sitting on a pile of cash, better to buy more. After all, who doesn’t love discounts?
Doctors gave him just 2.5 years to live, but destiny had something else in store for him. As he grew older, his grip over his body declined. Fortunately, the growth of the disease also declined. Though confined to a wheelchair, he lived with the disease for more than 50 years. And contributed towards humanity with his rational research work and ideas.
Sadly, after completing his research paper on Black Holes, he passed away on March 14, 2018. He left behind a rich legacy that will continue to serve budding cosmologists and scientists. A work that will turn out to be a stepping stone in the future space exploration missions and researches.
Source: richifymeclubThe article has been reproduced with permission from richifymeclub.com.You can now invest in mutual funds with moneycontrol. Download moneycontrol transact app. A dedicated app to explore, research and buy mutual funds.