The sky is not blue, a leaf is not green
Question: When I talked to my friends, they give me different recommendations on where to invest my hard- earned money. But at times, I would get varying recommendations on even just one investment. How is that possible?
Answer: On a clear sunny day, we see the sky as blue. Some say it is because the sky reflects the color of the blue ocean. But why is the sky still blue in the middle of deserts that are far from bodies of water (e.g. Sahara desert). And at night, the sky is not blue.
Scientists say that the sky appears blue on a clear sunny day because of three things: 1) light coming from the sun that shines down on the earth; 2) air molecules; and 3) the human eye.
The sun gives off light, which we perceive as white in color. However, that light is really a combination of ultraviolet visible light (i.e. ROYGBIV or rainbow color order, which is around 40 percent of the sunlight) and infrared light. Air molecules scatter more of the shorter wavelengths in visible light like violet and blue, which give the sky its perceived color. But why is the sky not violet? It is because the human eye is more sensitive to blue than violet, hence the blue color of the sky.
An average healthy leaf is technically not green. It is every color but green because it is only the color green that bounces off it, hence our perception is that a leaf is green.
With human nature, what is commonly perceived appears to be reality. But that reality can be altered with new beliefs. For example, for the longest time, Pluto was believed to be a planet until someone proved it otherwise.
In times of uncertainty, conformity with the commonly perceived reality follows. But following the crowd is not always correct. For example, they say that the true value of a company is its price in the stock market because that price was arrived at based on the collective wisdom of investors. However, in turbulent times when many factors are tugging at stock prices—just like now with supply shortages caused by the pandemic that are causing high inflation everywhere, the Russia-Ukraine war that has compounded such supply shortages and moves by central banks to tame inflation through rate hikes—stock prices go through wild swings even when some companies’ fundamentals are very much intact.
Your job as an investor is to do your own research and not just listen to Marites, Marisol or even Marife. There is so much fake news out there that are all designed to prey on the uninformed and lazy investor who is out to only get rich in the fastest way possible.
The intelligent investor will not just invest blindly and listen to free tips, for that is gambling. He will study for himself the truth about the historical performance of a company and from there make his own projections of future performance. And while good past performance is not an absolute guarantee of good future return, there is substantially much less to expect from bad past performance. The intelligent investor will use technical charts to see which company is the most beaten down in value without much justification so that this investor benefits immensely when that company recovers in price.
This decision-making process does not just apply to investing but to all aspects of decision making in life as well. And the process is most effective if it is enveloped within a prayer for divine guidance.
Be that intelligent investor especially during times of uncertainty. INQ
This question was asked at “Ask a Friend, Ask Efren” free service at www.personalfinance.ph, SMS, Viber, Twitter, LinkedIn, WhatsApp, Instagram and Facebook.
Efren Ll. Cruz is a registered financial planner and director of RFP® Philippines, seasoned investment adviser, bestselling author of personal finance books in the Philippines and a YAMAN Coach. To consult with a YAMAN Coach, email [email protected].
To learn more about personal financial planning, attend the 96th RFP Program this July 2022. To inquire, email [email protected] or text at 0917-6248110.
