Mythbusters: myths and legends of the world of investing

It is time to slay some monster myths of investing; so let’s navigate the labyrinth of myths.

Article updated: 25 February 2019 12:00pm Author: Michael Baxter

Remember the lesson of Pandora:

According to mythology, Pandora was unable to resist temptation and opened a jar — or a box — left by Zeus, which contained all the ills of the world. Don’t be like Pandora, don’t succumb to temptation and throw all your money, or even a big chunk of it, at a hot stock. In hindsight, certain stocks can see an extraordinary performance; but none of us have the gift of a seer, none of us can see into the future like Apollo, the Greek god of prophecy. With this in mind, diversify, diversify and do some more diversification.

Investing is not gambling

According to Greek mythology, Zeus and his brothers Poseidon and Hades drew lots to decide upon the domain over which they would rule. Zeus won the heavens, Poseidon the sea and Hades the Underworld. From that story, the Greeks believed that gambling was an act of god. But investing and gambling are not at all the same, providing you follow some ground rules: diversify, look towards the long term, and sell when market conditions say it is a good time to sell, not when you need it.

Fortunes are not made in a moment

Unlike Athena, who was born fully armoured in adult form, from the head of Zeus, fortunes are not made rapidly from investing. There are no short cuts, no instant routes to riches, you need a long term horizon.

You make your own fate

There is no such thing as fate, there are no three sisters, unlike in the tales of Greek mythology, where Clotho, Lachesis, and Atropos, spun the thread of life, determined our destiny and then cut the thread. You make your own luck through research, being sensible by diversification and by making thoughtful judgments.

There are no Cassandras, but you can seem like one

Unlike the Trojan priestess Cassandra, who foresaw the collapse of Troy, only to be disbelieved, there are no investment Cassandras out there. Some investment gurus can beat the markets year after year, but their track records rarely passes the test of time in the long term. But maybe you can enjoy the seeming prophetic powers of Cassandra by buying after a stock market crash and recognising when the markets are valued too high.

Keep cool, don’t let your emotions rule your investing decisions

Heracles might have been the mightiest of Greek heroes, but he was easily riled, went into blind rages and as a result, Hera, the wife of Zeus who hated her husband’s illegitimate son, found him easy to manipulate. Don’t let emotions rule your investing strategy, and never get sucked into loss aversion, where you are unwilling to sell a stock that has already lost money. Ask yourself this question of all your portfolio: would I buy if I didn’t already own?

Beware the lustre of gold, or indeed cash

King Midas was given the gift that all he touched turned to gold. It turned out to be a curse. But just remember, while gold can be a good hedge against inflation, pundits who have been saying ‘buy gold’ over the last nine years, have been wrong, so far. For that matter, cash is not a good asset for accumulating wealth — indeed if you want to have your portfolio protected from the ravages of inflation, it can be quite risky.

These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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