Protect Your Investments From the Sirens Pt 2

"Therefore pass these Sirens by, and stop your men's ears with wax that none of them may hear; but if you like you can listen yourself, for you may get the men to bind you as you stand upright on a cross-piece half way up the mast, and they must lash the rope's ends to the mast itself, that you may have the pleasure of listening. If you beg and pray the men to unloose you, then they must bind you faster."

The Odyssey, Homer

Intro: The Sirens of Investing Are Real

In the first post of our series, ‘Outrunning the Sirens of Investment’, we discussed the Greek story of Odysseus and how he and his men were able to escape the sirens who would lure sailors with their beautiful voices to their deaths. We also discussed by this Ancient Greek story was relevant in investing today. The sirens in this case are the internal and external voices that cause investors to ‘put in more money’ or ‘pull out their money’ from an investment when this action can lead towards a disastrous outcome for wealth accumulation.

We will now go over the 3 strategies on how investors can protect their investments and outrun the sirens just like Odysseus was able to do so.

Siren Resist Strategy #1 Set in Stone Some Rules

The first defense against sirens lies in the setting of rules. Before he ventured into the siren’s den, Odysseus set up his rules of engagement: 1) everybody except him would shut their ears, 2) he would be bound to the mast, and 3) if we beckoned his men to untie him, he would be bound even tighter. There are many different siren songs that can call an investor to put in more money or pull out their money. To not get swayed by all these temptations, an investor must have rules that they can lean onto when things become chaotic or uncertain. These rules can be different degrees of restraint. Investors can limit the total amount of investment or the sum per investment or the frequency in which they put in the money. They can also limit the amount of additional money they borrow to increase their returns. Additionally, they can also prevent withdrawals of any previous investments or withdraw only when a certain level of return is met. It is important that there is no one golden rule. A combination of rules will be enough to create the right mind for the investor to ward off the sirens and protect the investments.

Siren Resist Strategy #2 Invest with Others

Odysseus did not ward off the sirens alone. He owed that to his men who obeyed his orders and rowed the boat without listening to the sirens. They were the ones who bound him tighter to the mast. It is the same thing with investing – It helps immensely when you have other people who are helping you ward off the sirens. When you are in a group who operates under a set of rules, the group becomes more accountable and less likely to deviate. People take part in the group because they feel a sense of belonging to a common cause and a sense of kinship. In the case of a group of people investing, this can ward of the sirens of investing because there IS a common purpose for the group to survive and thrive in investing and not to squander/destroy the opportunity for wealth. Strength in numbers means more people who can hold you accountable and more people who can evaluate critically whether there is a siren that is trying to ruin things. Others can protect your investments as well.

Siren Resist Strategy #3 Consume News Selfishly

We have already briefly discussed that sirens are not just temptations that come from within. They are the many tweets, youtube videos, news articles, blog posts, PR statements made in the media that each push an agenda of their own. Attempting to analyzing all this news in a rational, fair manner is a shortcut to disaster, especially when it comes to investments. First, thanks to social media and its many different mediums, anybody can broadcast their opinions over the internet. Knowing that attracting a large viewership or following can bring you money and influence, people seek to project messages that are incendiary rather than objective. Many times this involves making educated guesses or false claims about what will happen in the future. It is important to make sure that you as an investor do not fall under the spell of the media sirens out there. The way to do is to be extremely economically selfish when it comes to digesting news. Economically selfish means only caring about the news means for the money you put in. Are we concerned about which dress Kim Kardashian is wearing the upcoming Oscars? NO! Does news of the Dow Jones falling by 15 basis points really matter to you? Actually no. Its more about the background causing the drop that is more important. Bitcoin being adopted in American Walmarts as a payment method? If you have invested in Bitcoin, this IS the news that you would want to pay attention to since it potentially can cause more people to learn about Bitcoin and invest in it. To ward the all the media sirens away, be liberal in trashing out any news that does not serve to help you make your investments greater or protect them.

Conclusion: Defend yourself at All Times

It is a well-known saying in the sport of boxing to “defend yourself at all times”. In the ring against your opponent, you have to be prepared for any blows from your opponent, but also any tricks that your opponent can play on you as well. The same goes for investing as well. Although I said earlier that one of the ways to resist the sirens is to invest in a group, ultimately the responsibility of protecting and increasing one’s wealth lies in the hands of the investor alone. Yes, the journey to becoming wealthy is not easy for there are many temptations both internal and external that can lead to your wealth going to zero at any time. However, it becomes a winnable battle when we first know what these sirens are and how they try to coax us into putting more money in or pulling our money out. Our victory is further ensured when we know of the strategies to beat the sirens – to know the power behind strength in numbers, how to filter out news we encounter so that we only see what matters to our wealth, and sticking to sound rules that matter no matter the situation.

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