During missions in Afghanistan and Iraq, American soldiers were required to wear heavy body armour to protect themselves from enemy attacks. While the intention was good—ensuring maximum safety—it didn’t account for the realities on the ground.
Imagine trying to climb steep mountains while wearing heavy gear. Soldiers found it nearly impossible to complete their missions while carrying such heavy protection. Worse, the extra weight often slowed them down, making them easier targets.
To complete their missions, they had to remove some armour—taking calculated risks to balance protection with agility.
Shoplifting and Grocery Stores
Now, let’s step into a grocery store. Shoplifting is a common problem. Store owners know they’ll face losses due to theft, but trying to eliminate it entirely would drive away customers. For instance, extreme measures like strip-searching shoppers would turn them off.
Imagine if every customer was strip-searched to prevent shoplifting. Would anyone shop at that store? Of course not!
Instead, store owners accept a small, manageable level of theft as a cost of doing business. This balance allows them to operate smoothly without pushing away customers.
Connecting the Dots to Investing
Both stories reveal a key truth: too much safety can backfire. In the world of investing, this plays out in two ways:
- The Soldier Story’s Lesson:
- Many investors stick only to “safe” options like fixed deposits (FDs) or savings accounts.
- While this feels secure, it weighs them down in the long run. For example, parking ₹1 crore in FDs earning 7% returns over 20 years might barely keep pace with inflation (6-7%).
- To grow wealth, you need calculated risks—like diversifying into equity mutual funds, gold, or government bonds.
- The Grocery Store Lesson:
- Just as store owners accept manageable losses from shoplifting, investors must tolerate short-term market volatility.
- Avoiding all risks—like never investing in equities—means missing out on long-term growth opportunities.
Key Takeaways
- Balance Safety and Growth: Combine stable investments (FDs, government bonds) with growth-oriented options (SIPs, equities).
- Accept Volatility: Understand that short-term ups and downs in the market are natural and necessary for long-term wealth creation.
- Think Big Picture: Like soldiers removing some armor or store owners accepting minor losses, focus on your overall financial goals, not just avoiding risk.
Closing Thoughts:
Perfection is an illusion. Whether it’s in life, business, or investing, trying to eliminate all risks or inefficiencies is impractical—and often harmful.
The key is balance. Embrace calculated risks and accept some level of imperfection. After all, being “too safe” can sometimes be the riskiest move of all.
