Kwame vs. Jafari: What Type of Goldminer Are You?

Goldminer are you

 

Highlight: Like life, even in investing, situations take turn for the worst before gliding into a zone of unprecedented fortune. This is perhaps how nature & markets ensure that the fortune favours only the bold and deserving. Think about it; only people who invested when nobody had the heart to buy and sold when everyone on the street wanted a piece of the pie, amassed huge wealth.

Times like now reminds me of a story. Obviously, it is more of an analogy than a story – but highly relevant to draw upon during times like now.

This narration refers to an episode that unfurled at a time when gold mining was not as commercialised as it was today and most mines (like the Kloof) was treated as a natural bounty and gold had meaningful value as a metal.

Kwame belonged to a family of economically poor yet hard-working people, somewhere in a small African village. He would always laze around while his parents and elder sibling would work as daylabour at nearby farms and  lantations. Kwame would always daydream about being rich and putting his family’s sufferings behind. As luck would have it, he once chanced upon an ancient scripture and map pointing towards what is today known as the Kloof gold mine in Africa. This mine was not very far from his village. One fine day, he set out on his expedition to claim his fortune.

Soon, he was at the mine. To his amazement, there were more who knew about this place and were already digging in separate designated patches. When he asked around, some said they’ve been digging since a couple of weeks and some said a couple of months – but surprisingly, none of them struck gold.

Kwame was a smart guy, he thought he could strike gold faster if he hired someone to help him excavate the mine. He hired a kid called Jafari from the nearby village and promised to pay him once they achieved their first milestone of excavating 5 ounces of gold. They continued to dig and drill through his patch of the mine for six weeks, but all in vain. The season changed; it was already monsoon and storm clouds hovered. It was getting difficult to weather the storm. Kwame finally thought to himself that he can no longer while his life away like the others have been doing since weeks & months and he decided to abandon Jafari & all his tools in the middle of a stormy night to return
home.

The next day, Jafari sat heartbroken in the middle of spades, shovels and other digging tools but without a penny Kwame owed him. Since Jafari had already spent so much time away from home with the promise of getting back with some money, he did not have the heart to return empty-handed. With nothing better to do with his time, Jafari continued working on the mine patch for another four days – all through the storm. Almost as if the storm turned into an ally from being a foe, it started loosening up the tough rocks in the mine – in a way, helping Jafari dig faster. It was only a matter of time and Jafari struck gold. That was it. Jafari struck gold just after Kwame lost heart and right at the brink where most people would quit. Jafari was persistent and endured the pain with strong belief. After all, seemed like fortune definitely favoured the bold. Jafari’s life turned for the better, forever. All because he decided to stay the course, endure and continue in a disciplined manner.

Kwame was, in fact, smart enough to know where to dig and how to dig. However, his biggest mistake was losing heart right in the middle of his venture and being impacted by what’s happening to others.

Little did he realise that he was perhaps only a couple of days away from mining the largest gold deposit in a 100-mile radius.

Like the episode of Kwame, Jafari and the Kloof mine, equity markets welcome millions of new investors almost daily and continues to put them to test. While a handful out to be Kwame just too soon, a few continue to endure the markets like Jafari. The end being none different than the fate of Kwame & Jafari in the story above. The Jafaris go on to be known as “lucky” while the story of Kwames are used to monger fear.

Here is a crude illustration of how the Jafaris (rational long-term investors) and Kwames (naïve investors) of the market invest and the journey they go through:

 

naive investors

Investor Takeaway:

Be a Jafari, not a Kwame. Keep your head down; ignore the chaos. Focus on your financial plan, asset allocation & discipline. Market cycles are called cycles for a reason.

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