Connect to the earth (The Financial Athlete #59)

The horse stance in Kung Fu is a tool of endurance training, strengthening the quads and the muscles in the back. Beyond its physical benefits, the kung fu practitioner mystically feels “connected to the earth” or “grounded”. From the earth, he draws power in his stance, punches, and kicks. Without being connected to the earth, his opponent can toss him like the wind.

It is equally important for investors to feel “connected to the earth”. By doing so, he does not allow himself to get carried away with projections of medium-term and long-term future earnings. He knows with the passage of time too many variables come into play. Of these, some of the hapless ones no one preconceived.

To be grounded is to dwell on “WHAT IS” more so than what will be. “WHAT IS” has certainty. What will be has no certainty.

To be grounded with both feet is superior to grounding with only one foot. The right foot represents the asset side of the ledger, while the left foot represents the liability side of the ledger. To be grounded with both feet is to increase assets and decrease liabilities simultaneously. Many are very adept at increasing assets with corresponding increasing liabilities. All is well with this until asset prices depreciate. While your assets depreciate in market price, nobody forgives your liabilities.


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