Why every major investor puts great stress on learning?

Every year, floods ravage great portions of the world.

This causes great losses, great suffering, and great inconvenience.

Take the floods affecting Bihar or Assam for example.

Nearly every single year, people abandon their villages to temporarily live on higher ground.

In the houses they leave behind, they often aren’t able to carry all their belongings.

Some pets die, some get lost. Mind you, in cases, pets aren’t just pets, they’re also a source of income - cows, goats, chicken, etc.

And then there’s the lifestyle that comes with living in such a region.

If you knew your area would be submerged underwater for a few days or weeks, would you buy many big expensive items? Like a fridge, TV, or car?

Would you set up a factory to manufacture small items?

The floods affect every decision a person residing here has to make.

And that is the nature of the land. It is what it is.

Until the floods in this region are stopped, the people will have to live accordingly.

Their minds are programmed to expect floods every year.

And this flooding has been taking place for centuries - not much ever changes.

The Dutch people live in Netherlands (also called Holland).

The Dutch tend to use cycles to get around more than most other countries.

Because a good portion of the country is very easy to cycle on - the country is incredibly flat. As flat as the sea.

Where it is situated, the Netherlands faces a problem that many other countries face, but the Netherlands faces more than others - flooding and land erosion.

The seas have been biting away chunks of land for long.

The Dutch, though, are not running away.

The seas are mighty, fierce, and harsh. And the Dutch, they’re fighting it.

They built dikes.

Dikes are walls of land with water on both sides of the wall.

Dikes first came into existence about 500 years ago.

These walls prevent water from flowing across and therefore prevent erosion.

Somewhere along this, they set up water pumps powered by windmills and drained the water trapped away from the sea.

On this drained piece of land, they started farming.

They created new land out of the sea. They did to the sea, what the sea was doing to the lands of the rest of the world.

But this was still relatively a small operation. Until 1932.

In 1932, they built a massive dike across a big portion of the sea. And since then, they’ve been reclaiming bits and pieces of land inside this dike-enclosed lake.

By the way, these aren’t small pieces of land. They’re massive.

So massive, they had to create new states for these new lands.

17% of Netherlands is land that used to be the sea.

That is around 7000 sq km.

How big is that? It is nearly twice the size of the entire state of Goa.

Yes, they created new land that’s twice the size of Goa.

The Dutch love cycling because the land is as flat as the sea, remember?

That’s because a lot of their land was, in fact, the sea.

There was a point in time the country was worried about how it would feed its growing population.

Today, it has so much, it is the second-largest exporter of food in the world. The first is the USA (a country which is over 200 times larger).

Where do things stand today?

The world’s seas are rising and land is being lost. But the Dutch are fighting and winning. They have plans chalked out till beyond the year 2100.

In investing, when the price of certain stocks or generally the markets climb, there’s this tendency to expect the markets to fall to an older level.

When the markets reach a certain high, some people stop buying because they expect the markets to fall.

This is quite like the floods we see in most places of the world.

The floods go away, but they’ll come back soon. Many of our minds are programmed like this.

Unless, the land is changed, like in the Netherlands. Then, the floods aren’t coming back.

When the markets or certain stocks go up or down, the question we all need to ask is, what has changed?

Has the underlying economy or company changed? Have things changed on the ground?

If things are more or less the same, then maybe the stock price will return to where it used to be.

But if they have changed, the markets or stock has reached a new fair level.

Many investors tend to stay out of the markets when the best climbs happen because they think the markets are overvalued or overheated.

Fair enough, that can and does happen.

But very often, what also happens is that actual growth has taken place.

So to be more understandable as I've mentioned earlier on my articles, I would like to give it with a quote:

"Learn every day, but especially from the experience of others. It's cheaper." - John Bogle

The stock market is vast enough that you can continue making mistakes and learning from them for a very long time - longer than your money can last.

This is why every major investor puts great stress on learning. 

John Bogle observed numerous big-ticket investors lose money repeatedly but with newer mistakes. There were always new mistakes to make.

Looking at their mistakes, he created something much simpler - the index fund. 

Index funds are very simple funds that track an underlying index like Sensex or Dow Jones. 

His idea was that a simple index fund free of any biases or human emotions and thoughts would do better than the human fund managers. 

Over the years, at least in the US, index funds have beaten nearly all actively managed fund managers.

Hope you like it.