Investing Also Needs the Hunter and Farmer Theory

Thom Hartmann, a former psychotherapist, first came up with the Hunter vs Farmer theory in 1993. Hartmann’s son had been diagnosed with Attention Deficit Hyperactivity Disorder (ADHD), which led him to look at it closely. He then proposed the Hunter vs. Farmer theory to explain it and drew the conclusion that such disorders were a result of natural adaptive behavior. Although criticized initially, recent clinical research has given support to the hypothesis.

The Hunter vs Farmer theory finds application in Business Development and Sales circles. Sales people are categorized either as hunters – the ones who “hunt” for new opportunities, finding an opportunity even when it doesn’t appear to be one. They are independent, and always generate buzz and excitement. Or sales people might be categorized as farmers – ones who nurture relationships and opportunities, typically within existing accounts.

Investor behaviour too can be classified as Hunter or Farmer
For the hunters investing is a very thrilling game. They expect to earn their returns in weeks or months. They are moved by each market fluctuation. They keep experimenting with the new trends. You’ll see the hunters making confident predictions on stocks on the TV and news channels.

On the contrary, the farmers will tell you that investing is quite boring. Conservative, steady and patient, they stick to tried and tested principles that will yield crops from seeds in due season. They do not get take calls on what the climate will be like in the next few quarters; instead they are interested in maintaining a portfolio that offers the greatest likelihood of good returns in the long run, regardless of climatic conditions. Farmers generally ignore short term volatilities and seek returns in years or decades.

Investments are for the farmers
Actually investing works only for the people with the farmers’ mentality. The most important qualities required for successful investing are patience, discipline and long-term focus. A mutual fund, or for that matter, any investment product should never be bought impulsively. Investors need to do the research and make sure the product is a good match for their requirement. And they should be prepared to stick with it for a while before ‘rotating the crop’.
Approaching investments with a hunter’s outlook is generally dangerous; sooner or later the individual would call it quits and be gone. And more often than not such investors who’ve burnt their fingers become totally opposed to investments. They will call investments a gambling game. If friends mention investments they will warn them, citing their own experiences of loss, and contend that the good old FDs are the best (and only) way to create wealth.

Unfortunately, to a large extent the industry itself is to be blamed for the lack of trust in mutual fund products. It is responsible for many bad practices followed by investors. There are so many investors who own mutual funds by the dozen but are clueless about it or why they bought the funds they own. How is that possible? That’s because investors are told, “Sir/Madam, this is a fantastic scheme. Here, look at the returns from so-and-so period. You just sign over here, here and here. I’ll do the rest of the filling. Easy!” Investors are advised to act swiftly on opportunities, and they end up jumping from product to product and constantly change gears. Numbers are flaunted. Who cares about the investment philosophy or process that is aimed at producing the bumper crop over time?

Up until late almost all marketing efforts of the industry was targeted at evoking the hunter-gatherer disposition of investors. Low average holding period of retail investors bears witness to this truth. And it is easier to market to hunters than it is to farmers. Flood all available media with advertisements of the funds with latest fads, the Make-in-India’s, the Infrastructure funds, the Technology funds,… Such marketing gimmicks might generate plenty of sales in the short run but the chances of redemptions in such funds would also be higher; and this hurts continuing investors. Marketing to farmers takes longer, but the rewards would be equally enduring, for all concerned.

Hunt only for game
Thom Hartmann’s theory proposed that over time more and more human communities chose farming as the means to find food and started living settled lives. However, certain individuals might retain some of the older hunter-gatherer characteristics, which are displayed in persons with ADHD.

Now a farmer might decide to go on a hunting game with his son. But that does not change his primary vocation. He is not dependent on the game for his family’s sustenance or income; rather it is just for an occasional break. Similarly an investor could have interests in trading stocks, options and other derivatives. He/she might indulge in these to generate extra income. However they would occupy only a small amount of his savings and time. Doing this also requires good knowledge of the game and a high risk bearing capacity. Thus it is possible for one to be a long term investor and still do trading.

Notwithstanding, let’s not forget that all of us are farmers first. That is our primary occupation. Let’s keep focus on developing the vital qualities required to succeed with investments.

Disclaimer, Statutory Details & Risk Factors:

The views expressed here in this article / video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. Please visit – www.quantumamc.com/disclaimer to read scheme specific risk factors.

Above article is authored by Quantum.

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