In Stephen R. Covey's bestselling self-help and business book, 'The 7 Habits of Highly Effective People', Covey refers to Aesop's fable of "The Goose and the Golden Egg" which, in countless ways, can be applied to investing and personal finances.
The story goes that a farmer went out to his barn one day to find that his goose had laid a golden egg. While he originally thought that someone was simply playing a prank on him, he analysed the egg in greater depth and realised that it was indeed pure gold.
From there, he excitedly awoke every morning to collect a new golden egg which he added to his growing collection. While the farmer became very wealthy as a result of this process, he also became very greedy, wanting the eggs faster than what the goose could produce.
Unable to wait any longer, he went to the barn early one morning and killed the goose hoping to retrieve all of the gold inside it all at once. To his horror, he found that the goose was the same as any other goose on the inside, and that in trying to become rich all at once, he had deprived himself of the gain he was assured on a daily basis.
The logic to be taken away from the fable is that people will often focus on the golden egg while at the same time neglecting the goose that lays them. Indeed, there are many key takeaways for investors from this story, some of which are mentioned below and may assist those investors in their path to fulfilling their financial goals:
Focus on the big picture
It's not unusual for investors to keep a close eye on their portfolios, watching for any day-to-day movements in their wealth. While decent gains (or painful losses) can be made in the near-term, the long-term is where the real profits are made.
Nurture your portfolio
It can be tempting to construct a portfolio comprised of speculative stocks or ones with enormous growth potential, which can often deliver superior returns but tend to carry a higher element of risk. Rather than looking for a get-rich-quick scheme, it's vital to maintain a strong base for your portfolio, comprised of stocks that are often incapable of delivering substantial gains in the near-term but provide growth and security in the long-term.
Woolworths Limited (ASX: WOW), Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and Coca-Cola Amatil Ltd (ASX: CCL) are all examples of this sort of investment and could make for perfect additions at their current prices.
Greed can be blinding
When big profits are being made, it can be easy to become greedy or to set too high expectations. It's vital that you maintain reasonable expectations for your returns and remain patient with your investments for the long-term.
As Ignacy Krasicki's fable "The Farmer" goes,
'A farmer, bent on doubling the profits from his land,
Proceeded to set his soil a two-harvest demand.
Too intent thus on profit, harm himself he must needs;
Instead of corn, he now reaps corn-cockle and weeds.'
Feed your portfolio
In addition to the nurturing that is required, investors should also remember to feed their portfolios by adding cash (and reinvesting dividends) on a regular basis. This should keep the goose happy in the long-run and ensure it keeps laying those golden eggs.
