The Oak and the Reeds is an Aesop Fable about flexibility. The mighty oak stands proud against the wind while the reeds bow low. They bow, but they do not break. The mighty oak stands rigid; it is stubborn and fights the storm. During a northern hurricane, the mighty oak was uprooted and fell among the reeds. The reeds were flexible; the mighty oak was not. Bruce Lee knew this philosophy well when he said, “Notice that the stiffest tree is most easily cracked, while the bamboo or willow survives by bending with the wind.”
Investors can learn much from this Aesop Fable. Investing is not binary or rigid. It is not black or white. To be a successful investor, you must be flexible, willing to bow down to the market. If you’re not sure about your investing strategy, the market is an expensive place to figure it out. Many investment programs are rules-driven – low PE, small-cap, momentum, etc. But, if you’re not willing to break the rules in the short term, it may cost you in the long run. For example, if you focus solely on low PE stocks, you missed Amazon’s epic run. Amazon’s average PE is 234. Its low PE over the past 17 years was 93, and the high was 3,735. During Amazon’s elevated PE phase, the stock soared 7,310%. A $10,000 investment in 2004 is worth $741,000 today.
January 5, 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.
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