Hi Money makers,
It’s your favorite content creator, TalkingCents.
I want to take a second to welcome you all into 2024. I hope this message finds you in good health, high spirits, and ready for the amazing journey that is 2024.
Before I dive into today’s article on the parallels of a rooted tree and investing, I want to take a minute and explain what to expect from me in 2024.
With the new year comes a few big commitments on my end. These commitments will demand a significant portion of my time and energy, and I want to be transparent with you about the impact it may have on our regular interactions. I won't make promises I can't keep, and as such, I won't commit to sending out articles on a weekly basis moving forward.
However,
I want you to know that even though my schedule will be busier, I haven't forgotten about this wonderful community. In fact, I'm more committed than ever to provide you with valuable insights and perspectives on topics that matter. Instead of a predictable schedule, I've decided to surprise you with inboxes containing my articles when I find the time.
That means you won’t hear from me as often, but when you do, you can expect impactful value.
The Parallels between Investing and Nature
There are inherent lessons in nature that many of us tend to ignore or dismiss, nature shows us that life is more simple than what it is made out to be. It is our minds that overcomplicate our existence, but if you take a few moments a day to look through these complicated webs, you will find mother nature whispering into your ear.
Fortunately for all of you, from my last travel excursion I took time to listen to these whispers, and I will now share what I heard with all of you.
Within the context of investing, nature instinctively understands the importance of rooting herself and playing long-term games.
There is a famous quote by Germany Kent, which many of you may have already heard, because it serves as a a source of motivation for many influencers.
“If you feel stuck, move. You're not a tree.”
Picture Credit: Vladimir Kudinov
I’ve always admired this quote, because it serves as motivation that your current circumstances can be changed if you take deliberate action to do so. However, after my latest travel excursion my perspective has some what changed because of these subtle whispers.
A tree may not have the ability to move and change its circumstances like you and I, but, a rooted tree teaches us an important lesson about the benefits of time and making the most of where you are now.
It uses this time it is given and doesn’t allow itself to be influenced by indecisiveness. It roots itself deep into the Earth and commits to it’s personal growth, because if it doesn’t, it inherently knows it will not survive.
This fundamental lesson teaches us that much like a tree planted firmly in the ground, investing often demands time to yield substantial results. This fascinating aspect lies in the subtle transformations that occur over time, mirroring the way a tree steadily grows.
Consider the initial stages of a tree's growth—much like the early days of an investment, progress may seem imperceptible. Yet, just as a tree's girth slowly expands, with an average annual increase of approximately 2.5cm, investments too mature gradually. The girth, measured around the trunk, serves as an indicator of a tree's age, emphasizing the undeniable correlation between time, growth, and resilience.
The larger the trunk of the tree, the older the wisdom.
Measuring a tree’s wisdom requires only 3 things:
A tape measure
Understanding that a tree’s girth grows on average 2.5cm a year
Taking the time to go measure
Likewise, investing only really requires 3 things:
The correct tools
Research and information
Long-term commitment and effort
Let the steady strength of a rooted tree be a reminder that in our investment journey, patience over a period of time is a superpower.
Long Term Growth
To contextualize natures message to us, the term “compound interest” has been coined by academics. The term compound interest refers to the process where the interest on a sum of money is calculated on both the initial principal and the accumulated interest from previous periods.
In simpler terms, it's interest on interest, causing the total amount to grow exponentially over time.
Much like a tree's girth increasing gradually, compound interest operates similarly. While the tree's trunk thickens with each passing year, compound interest grows not only on your initial investment but also on the accumulated interest or efforts from prior periods. This silent expansion of the tree's trunk echoes the subtle yet impactful growth of compounding.
When I heard these whispers, I knew that the parallels between trees and investing lies in the patience required for both phenomena to manifest noticeable results.
This is what this silent growth transmutes to, for example:
A R10 000 once off investment earning 10% a year for 30 years, and on top of that, you make additional R1 000 monthly contributions. At the end of the term, you would have amassed an astonishing R2.2 million.
Akin to the beginning stages of a tree, the beginning stages of your investment journey looks as if nothing is happening, but behind the scenes the roots are entrenching itself deep within, all in order for exponential growth to occur later on.
That is why starting earlier is crucial, starting early provides a lengthier runway for compounding to enhance your financial gains.
Consequently, my viewpoint on the initial quote mentioned at the start of the article has shifted. While the idea of restarting remains valid, my emphasis now lies in making decisive choices, committing to long-term growth opportunities, and realizing that substantial results stem from the patient accumulation of efforts over time.
This means that time is a two way street, it moves with or without you. Therefore, time used wisely, amplifies efforts into compound rewards. Yet, in inertia, it transforms into a silent adversary, stifling growth and potential prosperity. Recognizing its dual nature, as a tree instinctively does, is key to harnessing time as a strategic asset.
Let these numbers below showcase to you the importance of making decisive decisions early.
Keeping this in mind, we may feel going into 2024 that we have not achieved much in the years that have passed us, but let your wisdom guide you forward into the years ahead as the wisdom of a tree guides its branches.
I may have focused my article primarily on the monetary aspects of compound interest, but compound interest can be applied in all aspects of life - education, investing, friendships, and relationships. Embracing the broader perspective of compound interest allows us to unlock the full potential of growth and prosperity in every aspect of our existence.
Closing Thoughts
As we marvel at the stability of a rooted tree, let it be a reminder of the enduring power of patience over time in our investment journeys.
As the years before, 2024 will come and go, too. Seize this year and claim it as yours, and remember, results only become evident over the longer-term. So, the next time you pass a tree, don’t forget to take a moment to stop and to listen to the whispers.
I’ll leave you with this Chinese Proverb going into 2024,
“The best time to plant a tree is twenty years ago. The second best time is now”
Picture Source: Vitto Sommella
That’s it for now, I’ll see you when I see you.
Dave :)