A Siren’s Song
You can learn a lot about successful investing from a Greek hero that died several centuries ago. The man surely knew very little about investing. After all, the first stock market wasn’t created until more than 500 years after the story of his life was first told.
And yet, the lesson endures today.
Who was this hero? What lesson did he teach? How can you apply it today? Read on.
In his epic tale set after the Trojan War, Greek poet Homer told the story of Odysseus and his journey home. Odysseus was a war hero, who was reluctant to fight in the first place. Once the war ended, he desperately wanted to reunite with his family.
The route home proved perilous, though. Odysseus and his men encountered strange creatures, suffered the wrath of gods, and overcame numerous hardships on their winding path home.
At one point in the voyage, Odysseus sought the counsel of a goddess named Circe. She plotted a path home for him and his men. The goddess, however, told Odysseus about a threat he would face along the way. Circe warned him of the alluring but deadly Sirens. These monsters sang angelic hymns to attract passing sailors, who were ultimately led to their death.
Circe cautioned Odysseus that no man could resist the temptation of the Sirens. To protect him and his men, Circe gave Odysseus beeswax. The beeswax, when softened and inserted into their ears, would block the Siren’s alluring melodies, allowing the sailors to continue on their way.
But Odysseus was curious. He wanted to hear the Siren’s song.
He knew he would succumb to the Sirens if left unaided. So, Odysseus instructed his men to tie him to the ship’s mast. He foretold that he would beg his men to free him once he heard the Sirens’ chords. Under no circumstance, Odysseus commanded, should he be freed until the ship was well past the island of the Sirens.
The plan worked. The beeswax kept Odysseus’s men from succumbing to the Sirens’ song. They dutifully rowed in silence.
Odysseus, on the other hand, was tortured. The Sirens called to him. Their pleasing tunes were too tempting. He couldn’t resist. Odysseus pulled against his bonds. He struggled. He strained so much that the rope around his arms dug deeply into his skin. He pleaded with his men to release him. But his demands fell on deaf ears.
Eventually the ship sailed beyond the Sirens and out of earshot of their treacherous voices. Odysseus and his men were safe.
Where is the investing lesson in this tale, you ask?
The market is a Siren. It calls to us. It entices us. Most of the time its movements mean nothing. But they coax us into making decisions, to either buy or to sell. Too often, those decisions are harmful.
People often have a distorted view of what successful investing looks like. They believe it entails a lot of buying and selling. They believe it involves getting in and out of the market at the right times.
That is simply not true.
The best investors reduce the number of decisions they make. Nor do they attempt to time the market.
In a telling study by a professor at the University of California, Berkeley, the accounts of 66,000 investors were analyzed. The investors were separated into five groups based on how often they traded in their accounts. The results were clear. The “buy and hold” investors outperformed the “active” traders by more than six percentage points.
All of that buying and selling was harmful, not helpful.
The stock market is open 1,950 minutes most weeks. The Siren calls out to you at each tick. As long as you have a prudent mix of stocks, bonds and cash, you would be well served by following the example of Odysseus and his men. Plug your ears or tie your hands.
The song sounds deceptively sweet. Do what you must to avoid succumbing to the temptation of the market. It’s either that or give in and get suckered by the Siren.