I had originally started this as a post about not panicking when one’s investments go the wrong direction, but as I read someone’s bullish interpretation of a financial development, it occurred to me that this counsel is as important in the context of becoming more optimistic about security prices, returns, and opportunities.
Eventually, it’s going to happen. Instead of seeing stock prices as a sea of green, as in the image below, everything is going to be red.
Inevitably. the financial media, being its usual helpful self, will trot out a few so-called experts who were lucky enough to guess predict that this “much-awaited” correction would be coming. By the way, in a stadium full of coin flippers, there will probably be several who get tails five or six times in a row, but it doesn’t make them good coin flippers. Think of the experts as coin flippers.
If the correction goes on long enough, you’re going to be tempted to give in to the bearish tone expressed on financial television, and to avoid that, you’re going to need to steel yourself, in advance. If you don’t, and you give in to those feel-good bearish feelings, the odds are good that you won’t know when to get back in, and you’ll likely end up worse off financially than had you just toughed it out.
There was a character in Greek mythology who steeled himself for what he knew was coming. His name was Odysseus—in Roman mythology, he was called Ulysses—and he was the hero of Homer’s poem, The Odyssey, which is the story of Odysseus’s return to Ithaca after the Trojan War.
At one point in the story, our hero gets some travel advice from Circe, who warns him about the Sirens. The Sirens were enchanting creatures who would sing songs that would cause passing sailors to steer their ships into rocks, which would sink them.
So what did Odysseus do? Well, he wanted to hear the Sirens’ song, but he didn’t his ship to be dashed upon the rocks, so he instructed his men to lash him to the mast and stuff their own ears with wax. He made sure to instruct his men not to untie him. Mission accomplished, Odysseus goes on to his next adventure.
It shouldn’t be too difficult to find the investing parallel in this story, but just in case you missed it, here it is.
| Odysseus | = | You |
| Sirens | = | Prognosticators, financial television, etc. |
| His men | = | Financial advisor, significant other, etc. |
| Mast | = | Investment policy |
Like Odysseus, you want to hear what the Sirens are singing in that you want to stay abreast of financial developments. This may, however, even be unnecessary or, worse, disturbing, so you may need to stop your ears, too, in which case, don’t watch the financial news, stay away from finance websites, and, if necessary, stick your account statements in a drawer for a while.
I believe that one of the greatest services a financial advisor can offer is the clinical, distanced assessment of one’s accounts. A good financial advisor can remind one of past instances, when the clouds eventually cleared; provide a perhaps painful reminder of when past mistakes were made; and even respectfully tell one, “No! Don’t do it.”
The other powerful parallel is that of the mast, and it represents one’s investment approach or policy. For example, the approach might be a strategic asset allocation to work towards one’s long-term financial goals, with periodic rebalancing. So long as the long-term picture is unchanged, one should be bound to the mast so as to limit opportunities to make ill-timed changes.
So, whether the seas become choppy or appear calm for as far as the eye can see, perhaps some sound advice is to pull out a copy of The Odyssey and do some reading rather than reaching for the sell or buy button.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.