The Cautious Puppy (Financial Lessons from Puppies)

“Life lessons are everywhere, if we would but stop, look and reflect.”

This is a quote from Life Lessons from Ants by Liz Taylor. Being bitten by an ant, she paused and reflected on the capacity, courage, and constancy of ants. Like her, I am about to share an interesting story with you as told by my brother, Alfred, about a dog and her litter when he sojourned in the City of Zaria. I reflected on this and discovered a perfect similitude in behavior of these animals and man in his quest to grow his wealth.

One evening I laid on the sofa reflecting over my interaction with a prospective investor earlier in the day. She wanted to invest a certain amount of money that she felt the returns I offered weren’t that good. She had spent her day moving from one bank to another in search of a high interest yielding account to invest in but found none. “I will keep searching and if I can’t find an option better than yours I will contact you,” she said. It was at this moment the story of the cautious puppy popped up in my head. I had to call Alfred to share the story one more time because of the great financial lessons we can learn from it.

Alfred: “There was this beautiful dog that strayed into the compound I lived in and made it her home. I fed and cared for her. She had a shiny white hair coat with black spots. Neighbors thought I always bathed her. She had her first litter of puppies that were taken away by thieves. Then she had another litter of six puppies. These puppies despite being unable to see as they were just a few days old were so restless except Patty. I named all of them and built a house for them to restrain their wanderings and protect them from danger all around. Every time I returned from work I would find them in a nearby bush and in different corners around the compound. What amazed me was that their eyes were still not opened but they kept moving blindly.

Patty was unlike the rest. She was always sleeping, even when she started seeing she only moved when the mother was around and never came out in her absence. She never responded to the voices of strangers nor accepted food from them. She was very intelligent like the mother. Not surprising she became the only survivor and grew to the size of the mother. One of the puppies due to its curiosity died with its head trapped in some place, a neighbor sold one in my absence and the rest got stolen by thieves. Patty grew into a beautiful dog before I left Zaria. Her carefulness saved her life.”

The Dog and Her Golden Pups

Now, let us take the mother dog to be our golden stream of income that we divest in our bid to create wealth. For an employee, this comprises his salary, bonus, annual leave allowance, 13th month, etc. For a business person, it is revenue and profit. Her pups were precious to her but they had their lives in their hands. The mom gave them instructions before she goes out in search of food daily. If we could decode her barks, growls, whining, and howls to her pups, we would hear her say something like: “Don’t leave house. Stay together. You know your eyes are not yet opened; it’s a dangerous world out there. I will be back soon. I love you all. Be safe!” Somehow, it happened that only Patty kept the mom’s instructions everyday while her siblings were always lured by the exciting and dangerous world. Unfortunately, the restless pups were lost forever.

Conclusion: Diversifying into a more predictable, stable, and less risky investment.

This is the point in this entire story. Not putting all your eggs in a single basket of very risky investments. There are a thousand and one investment opportunities out there promising unbelievable returns with concealed equal chances of loss. This is apparent with the pups that were so restless, roving to their unfortunate fate. If given these ten investment options: fixed deposits, crypto currency, treasury bill, stock market, mutual funds, trade financing, crowdfunding, micro lending, agric business, and angel investment to invest in, I bet, if at all, treasury bill and fixed deposit will be the least attractive to you. But they could be your Patty. 

Relationship between Profit, Loss and Risk

In The Financial Expert that was Swindled by a Rogue  I drew two diagrams, Fig 1: The Wealth Creation Curve, and Fig 2: The Backward Bending Wealth Creation Curve to explain the danger inherent in forcing our funds to do the impossible. I see no better concept to use to close this piece on the need to divest into a more stable and low risk portfolio investment. Fig 1 depicts a normal wealth creation curve that has minimal risks with predictable growth. Fig 2 is the abnormal case where an investor wants to reap the highest return in the shortest possible time. This forces the wealth creation curve backwards equaling the risk of losing the investment. So, why not let time take its course on one of your portfolios?