In this third Heritage Day story, we focus on an enemy that every investor must face: inflation. The Xhosa fable that inspires this important investment lesson is “The Story of Fudwazana and Gongongo”.
This fable begins with a scene from the past when all the animals (including humans) lived in total harmony, with no fear of one another, as they were vegetarians. However, when the Creator divided up the land, none was put aside for animals. This forced them to look for food in the gardens of their human neighbours, and sadly meant many were caught and killed while they foraged.
Lord Lion, their ruler, called a meeting of all the animals to find solutions to the problem. He declared that enough was enough; too many animals were being killed and it was time to relocate. They wanted their own lands to grow crops.
Suitable land was found, and the King of the Beasts set his subjects to work on farming. All was well, until one day all of their crops were destroyed by a beast called Gongongo, who was even mightier than Lord Lion. The animals rushed to tell Lord Lion that a monster had eaten everything they had grown. Lord Lion went to defend his kingdom, but found Gongongo to be terrifyingly large and fierce, and he ran away.
Fudwazana, the tortoise, offered to try to defeat Gongongo, but said he would need a weapon – a small, sharpened axe. Lord Lion was sceptical, but gave Fudwazana the weapon he wanted, and the tortoise began his slow journey to face the monster, with the axe hidden under his shell. Once he arrived, he challenged Gongongo, who in turn threatened to eat him. Fudwazana said to go ahead, as now that the lands were destroyed, there was nothing for him to eat anyway. But as Fudwazana reached Gongongo’s mouth, he pulled out the axe and began chopping away at the monster’s tongue, until it was completely severed, ultimately killing Gongongo.
The animals were elated with Fudwazana’s victory, allowing them to replant the land and live in harmony once more. To this day, thanks to Fudwazana’s actions, tortoises are respected as among the wisest, most cunning, bravest and most persevering of all the animals.
What does this fable tell us about investing?
In investing, inflation is Gongongo, the monster that ‘eats away’ at – and can ultimately destroy – your investments. If your portfolio isn’t performing better than inflation, you’re effectively going backwards and won’t be able to meet your investment goals over time. Gongongo was eating everything in sight until Fudwazana attacked his fundamental ability to eat by cutting out his tongue.
What can investors do to combat inflation? One of the best ways is to choose a fund manager that uses an active approach to investing. This is where the manager actively monitors the market, making buy and sell decisions to exploit fluctuations in asset prices. The objective is to outperform a particular benchmark, which can be inflation or a certain index.
Choosing the right mix of assets for your portfolio is also key in beating inflation. Equity exposure is important, since equities have proven to be the top-performing investments over time, and fixed-income holdings are also necessary to help lower risk.
A good financial adviser can guide you to the best asset managers and investments for your needs. Prudential’s Goal Calculator is also a good place to start.
This is the third of three Heritage Day stories that appear on the website of Prudential Investment Managers and are republished with kind permission.