Ancient Palestine Principle Used By Smart Investors

A sure rich man desired to travel so they called his servants & to they gave thousand dollars, to another & to the third they gave thousand dollars & travelled to Australia.

When they came back, they called his servants to account for the funds given to them. The first made additional thousand from investing the funds & had0 thousand, the second made & had thousand. The third went & buried his funds & when the master asked him, they told the master they knew that his master was a sinful man who reaped where they did not sow & they thus buried the thousand dollars given to him. They then gave the funds back to the master. The master then called him sinful & unfaithful servant & asked him the financial query why they did not put the funds in a bank so that when they came back, they will have both the principle & interest.

The first financial lesson the master was trying to teach was for us to understand inflation. The master & his servants lived in Palestine & because of the taxation, constant famine, & civil unrest in the empire, inflation was high. So if the master could buy0 oranges with a thousand dollars before they gave it to the servant, when they came back after a very long time, that thousand dollars which the servant buried will only be able to buy about six oranges because of inflation. For the master to have exactly the original value of his funds that bought0 oranges when they came back, the funds needed to be banked in an interest yielding account so that the interest it generates when the master comes with the principle will be able to buy the0 oranges again.

Thus to maintain the actual value of funds over a time period, it must be generating an interest equivalent to the inflation rate of the place. So the buried funds returned to the master was actually less than a thousand.

That is the secret of the very successful. They never fall in love with their company, producers, stocks or product. In the event that they see another venture that will guarantee them better yield & result, they move their fund to it no matter how long they have been with what they now have or how much they like it.

The master also displayed a financial mastery that every business man must copy in order to prosper. They asked that the thousand be taken from the man that has it & given to the man with0 thousand. They fundamentally was practicing maximizing capital allocation. They teaches us to always move funds from areas that give us tiny return to areas that gives us great returns even when that area of great return appears to be better funded, unattractive etc. You must never be sentimental about business capital allocation. Move funds from areas with tiny yield to areas that maximizes returns even in the event you like the less returns business.