zerodha Co-Founder and CEO Nitin Kamati, is an active user of Twitter Space and keeps on sharing his insights and learnings about the Indian market and the entrepreneurship sector with his followers. Recently, amid the boom seen in the Indian equity markets, Kamath shared an incredibly insightful article, put into words by Morgan Housel, which is currently one of the best-selling novels ‘Psychology of Money’. ‘ is the author of.
While considering important lessons about investing, the article also throws light on the unique relationship between nature and the functions and operations of the market. Sharing the link to the article, Kamath wrote in the caption, “Nature shows how it all works (markets too). Extreme events in one direction outweigh the chances of extreme events in the other. Complicated short long runs.” Change doesn’t happen by magic.”
Nature explains how it all works (markets too). Extreme events in one direction increase the likelihood of extreme events in the other. Complex small changes in the long run are indistinguishable from magic. A beautiful read @collabfund @morganhouselhttps://t.co/7Cihx1Ys72— Nitin Kamath (@nithin0dha) October 18, 2021
The article begins with the example of the California wildfires that cover about 1.8 million hectares of land each year. It focuses on the concept of equilibrium and states that an extreme event in one direction can lead to an extreme event in the other direction.
That’s what happened in California when the hot and dry areas of California received record rainfall in 2017. This brought great relief to the citizens of California. However, record rainfall created a domino effect and saw the deadliest wildfire season ever in California history. This is because the vegetation has been uprooted rapidly due to intense rainfall. But as the rain clouds disappeared, the abundant vegetation turned to fuel the fires in abundance, resulting in devastating wildfires.
Then the author draws a parallel line between the concept of California and the behavior of the market in Japan. Japan’s Nikkei 225 index rose 400 times between 1950 and 1990. In 2012, the market traded about 70 percent less than in yield years. The author calls it a disaster and writes, “Record good beats record bad – just like the California fires.”
The author then takes the example of the most amazing force of nature which has been prevalent since the beginning of the earth – evolution. “The changes of most species in any given millennium are so insignificant that it is not noticeable. The real magic of evolution is that it has been selecting for traits over 3.8 billion years,” the authors say. The author throws light upon the concept of compounding. “Time, not small changes, is what moves the needle,” he says. He then links this function to how “excellent for a few years” is nowhere near “very good for a long time”. The gist of the second parallel is that the things that matter are the ones that give you the returns in the long run and not the things that make the short term gains.
Kamat tweeted this article at a time when the Indian market is at an all-time high. The growth can be viewed on a broader basis, with blue-chip stocks as well as mid-cap and small-cap stocks witnessing growth. The Sensex opened at 62,245, while the Nifty was experiencing an all-time high of 18,600.
read all breaking news, breaking news And coronavirus news Here. follow us on Facebook, Twitter And Wire.
.