Not the Ugly CEO The marshmallow test

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From little things…

This article, by Justin Baiocchi, was originally published in The Northern Daily Leader on 6 December 2014.

Some time ago I decided to decorate my office with a little greenery, sort of like bringing the outdoors indoors. Not having had much success with plants in the past, I thought that this time I would buy a bonsai tree and do my best not to kill it within the first week. I imagined that being a tree (albeit a very small one) implied a level of hardiness and resilience not enjoyed by plants. I had actually owned a bonsai tree before, while still a student at university. Being young and inattentive, I failed to give the tree the attention it deserved, until one day it jumped off my apartment balcony, meeting a messy end on the pavement far below. Some said it was simply the wind which blew the tree off the balcony, but deep down I knew it was a voluntary act of euthanasia, brought about by my preference for socialising over tending to my tree. This time I was determined to ensure my tree thrived. I did some research first, and on the basis of a Google recommendation, bought a four year-old Chinese Elm, reputed to be hardy enough for even the most incompetent owner.

Over the next week or so I carefully tended the tree; watering, pruning and shifting it around the office to catch the most light. You can imagine my surprise then, when a short time later it dropped all its leaves and started pretending it was dead. Again I turned to Google for advice and made two important discoveries: firstly, bonsai trees shouldn’t live inside, at least not permanently; and secondly, the tree needed a lot less water than I had been giving it. It turned out that my close and constant attention, particularly with the watering can, had led to me essentially drowning the tree. I needed to just put it outside and leave it alone for a while, with just the occasional watering and the tree would recover (which it did).

My mistake with the tree was not so different from a mistake many people make with their investments. They check the share prices every day, sometimes even more frequently than that, alternatively elated or depressed by the rises or falls in the share price. It’s as though keeping a constant watch on the share price will make a difference to its performance. The reality is that constantly checking your investments is more likely to lead to you making a rash decision – look! BHP just fell by forty cents, I should sell it! Research shows that short term price movements have little bearing on long-term returns and constant fiddling with your portfolio is likely to lead to lower, not higher returns. Just as I did with the bonsai, give your investments some time and space and they should perform better too.