I’m reading Chop Wood Carry Water by Joshua Medcalf.
In one chapter, he writes about planting and growing bamboo. After planting the bamboo seed, it must be watered every day. It’s possible to see little to no growth after three to five years. The author adds: “What you don’t see happening is what is taking place beneath the surface. Beneath the surface, a massive, dense foundation of roots is spreading out all throughout the ground to prepare for the rapid growth that the bamboo will experience. So, you keep water it and watering it, and eventually, after five years of seeing nothing at all happen above the surface, the bamboo tree shoots up to over ninety feet tall in just six weeks.”[1]
The author highlights the invisible growth and hard work it takes to be successful – to trust the process. He adds, “Most people want the ninety-foot-tall bamboo tree without the five years of process.“
Investors can learn much from this passage in the book. Investors want instant gratification, with little downside. If a stock doesn’t rise quickly, it’s replaced by another in hopes it will fare better. If a portfolio is not growing fast enough, investors want to overhaul it to accelerate the growth rate.
From January 2000 through January 2011, the S&P 500 generated a negative return, eleven years without growth. If you sold the fund in 2011, you missed a 262% return on your investment.[2]
It requires patience, courage, and wisdom to create generational wealth.
January 4, 2021
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.
Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.
[1] Chop Wood Carry Water, Joshua Medcalf, page 64
[2] Vanguard 500 Index Fund, 1/1/2000 to 1/4/2021, YCharts