A man was walking down the street along with three donkeys.
Suddenly he felt the urge to go to the toilet.
Now where could he leave the donkeys when he went to the washroom. He kept wondering and wasn’t able to decide.
A priest who was nearby read the anguish that was written all over his face and asked him if he could help.
When he heard about the man’s predicament, he suggested that the donkeys be tied to the trees.
That would keep them bounded as he went to the washroom to relieve himself.
Hearing this piece of advice, the man sighed a relief.
But soon his relief turned into worry again. He told the priest that he had just two ropes.
The priest gave him an idea.
He told him to tie two donkeys with the actual ropes and the third donkey with an imaginary rope.
So the man tied the two donkeys with the ropes while the third donkey kept looking at him.
Then he pretended to tie the third donkey as well.
Now the third donkey believing he too was tied to the tree remained steady.
The imaginary rope acted just like a real one.
Moral of this story is that we often behave in a certain way because we are chained to beliefs like the third donkey.
While we can easily step away from our prejudice and move on, we remain stuck.
This behaviour is very prominent in the space of personal finance.
Most of us deposit in Fixed Deposits even though it is likely to lose the battle against inflation.
But we deposit there because of our belief that it is safe and we will not lose our money.
This is primarily because this message has been handed over to us for generations by our elders who enjoyed higher interest during their times.
Moreover there was hardly any other alternative then.
Our behaviour has become like that of the third donkey.
We remain fixated to our views by an imaginary rope which says Fixed Deposit is the safest.
Times have changed. New asset classes are on offer. There are new products and new methods of investing.
Transparency has gone up. There are better opportunities of getting educated.
But still we prefer playing the same old tune of safety.
We remain loyally stuck to Fixed Deposits as our chief savings product even though it’s expiry date has long since passed.
It’s high time we contemplate whether there is any merit in behaving like the third donkey.
Instead shouldn’t we simply snap the imaginary rope and move on to equity MFs.