Elephant and the blind folded men – The Big Picture and Beyond

Once upon a time, six blind folded men were guided to touch different parts of elephant and describe their perceptions. The first one touched the belly and said it’s a huge wall. The second one touched the tusk and said it seemed like a spear. The third one touched the trunk and thought it to be a snake. The fourth one touched the leg and thought it was a tree trunk. The fifth one touched the ear and said it was a fan. The sixth one touched the swinging tail and was convinced that it was a rope.

Getting the big picture:

In the midst of this sensory exploration, as confusion and differing interpretations created a chaotic atmosphere, a wise mahout, an experienced elephant handler, intervened. Sensing the perplexity among the blindfolded men, he realized the need to provide them with a broader perspective or the ‘big picture’.

With great patience and wisdom, the mahout offered a solution. He guided them to experience the grandeur of the elephant as a whole. He facilitated an elephant ride, allowing the men to grasp the enormity and majesty of the creature. As the men rode the elephant, feeling its different parts, they began to comprehend the true nature of this magnificent being.

Investing lessons from the Story

1. Diverse Perspectives Enrich Understanding

Just like the blindfolded men had varying perceptions of the elephant, investors have diverse perspectives on investments. Each investor brings a unique outlook shaped by their experiences, knowledge and goals. It's imperative to consider these differing views to make well-informed investment choices.

2. Asset Allocation

Like the various people in the ‘elephant’ example, an investor may be interested only in buying gold, while another may be prejudiced with fixed income or stocks. However, we all need to invest across various asset classes in order to mitigate risks and enhance potential returns. This approach may be aligned with individual risk tolerance, time horizons, and financial objectives. (Also read: Reducing Volatility with Hybrids)

3. Knowledge is Key

Informed decisions are empowered decisions. Understanding the nature of different investments—be it fixed deposits, stocks, insurance, real estate, mutual funds, or gold—is vital for making smart investment choices. Seeking guidance from a financial advisor for asset allocation can be a prudent step.

Beyond the Big Picture, the story continues:

The most important takeaway from the story is role of the mahout, which in the investing world is akin to the role of the financial advisor.

The mahout’s job is not completed just by mounting the elephant or by taking a single round on top of the animal. The mahout is responsible for helping the elephant feed and clean on a daily basis. The mahout also spends a considerable amount of time training the elephant. Most importantly, the mahout eventually becomes a life-long friend of the elephant.

As we draw a parallel, the investment advisor’s role does not end at creating an asset allocation and executing the initial financial plan. A good advisor handholds the investor through the journey of investing over the years. This includes coaching the investor during tough times in the markets, orienting a long-term outlook, while also taking calculated risks from time to time. This way, the advisor too becomes a life-long guide of the investor.

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