Mechanical Investments V/s Organic Investment

May 22, 17

Mechanical Investments V/s Organic Investment

Greetings from Hitesh! Our posts on Reliance JIO  V/S. Airtel and on USA horoscope have been appreciated by our regular readers. Today, we are going to deal with the most important aspect of investment – Mechanical Investment V/s Organic Investment. If you really understand this difference – it will help you make tons of money for life time.

Mechanical Investments:-

Have you seen a mechanic? He collects the parts and joins together and makes some new thing out of it. Say he is collecting PARTS and making a CAR. He is collecting parts and making a WATCH. You can take any example.

Same way the NORMAL investor when he starts investing – he collected the parts RANDOMLY based on the information/intelligence and resources he has.

NORMAL Guys have been BRAIN WASHED by WASTED interest guys to think about FUTURE PLANNING and RETIREMENT PLANNING and cajoled to do investing in some PARTS.

The problem is – he is not aware where the PARTS will make his car or not? He is not sure. So, he keeps on trying various ways and various parts.

My simple understanding of planning is – when you know your starting point and when you know your destination – you can plan in between. In reality of life – nobody knows the END point or destination point. So, all your planning is RANDOM. All your purposes are also RANDOM.

Mr.Nassim Taleb in his book – “Fooled By Randomness” has explained the idea of RANDOMNESS beautifully.

He said – that modern humans are often unaware of the existence of RANDOMNESS. They tend to explain random outcomes as NON-RANDOM.

Human beings…..

1.  Overestimate causality, e.g., they see elephants in the clouds instead of understanding that they are in fact randomly shaped clouds that appear to our eyes as elephants (or something else);

(It’s like seeing MIRAGE and assuming WATER. Normal guy gets a TIP and starts adding profit into his mind).

2.  Tend to view the world as more explainable than it really is. So they look for explanations even when there are none.

(They always spend time in asking why market went up today or why it went down today. They assume that the reasons they are arriving are 100% correct and there can’t be any more reasons then assumed by them).

3.  Survivorship Bias. We see the winners and try to “learn” from them, while forgetting the huge number of losers.

(Every time they TRADE – they think about their positive trade and assume how much they can earn, rather then thinking about losses they have suffered in the past).

4.  Skewed distributions. Many real life phenomena are not 50:50 bets like tossing a coin, but have various unusual and Counter - Intuitive Distribution. An example of this is a 99:1 bet in which you almost always win, but when you lose, you lose all your savings.

(They go for SURE SHOT calls as it there is no tomorrow and then they go for a TOSS).

Mr.Nassim Taleb in his Book, The Bed of Procrustes, shared another idea. Mr. Taleb addresses the modern day ways in which “We humans, facing limits of knowledge, and things we do not observe, the unseen and the unknown, resolve the tension by squeezing life and the world into crisp commoditized ideas, reductive categories, specific vocabularies, and prepackaged narratives, which, on the occasion, has explosive consequences.”

(Read the above  - as many times as you can and you will realize the TRUTH in it).

Many times a people with LOAN / CREDIT CARD also assumes that he is enjoying the same lifestyle as the guy who is 100% paying for it upfront and enjoying it. We have seen VIJAY MALAYA example.

Mechanical investment is the most dangerous way to invest as you are taking 100% chances at all the stages.

Organic Investment:-

I am sure you would have seen the ROSE BUD. It grows into full rose flowers and petals come out. This is growing from with in. You have the full thing first and it grows out in parts over a period of time.

Those who had RELIANCE shares in 2004 – knows what is ORGANIC GROWTH. It gave shares of 5 companies and still those companies are giving new shares of different companies. E.g Reliance capital is giving reliance-housing shares now.

This is the SAFEST and LOSS PROOF investment as it comes out from within and not depended on MARKET forces.

This requires HOLISTIC thinking abilities rather than RANDOM planning as done by most of the guys.

The problem with this approach is it requires PATIENCE, PATIENCE and PATIENCE. In the times of TECHNOLOGY – we are used to speed and we are losing patience like anything. Many feels 4g also slow.

So there is no competition for the people who have real patience within them. For speed there is no limit but for patience there is.

Warren Buffett is also aware about the limitation what TALEB talked about. So, he does the 100% reverse then the WALL STREET Guys. He just buys and keeps it for lifetime.

At DESTINY MANAGEMENT, we teach ORGANIC GROWTH rather then MECHANICAL GROWTH.

If you really want to make tons of money – this is the only way. Just master the same from us.

Have a GREAT WEEK AHEAD.

Follow me on Twitter @hiteshmparikh and join me on WhatsApp on +91 986 942 5399.

Live With Passion…. Invest With Passion.

Hitesh Parikh