Investors face all kinds of temptations.
Trustees of the British Museum. BM 1843.1103.31. Source: British Museum
There’s a passage in Book 12 of Homer’s Odyssey that describes the Sirens—beautiful creatures with the faces of girls and the bodies of birds. Their magical song promises knowledge, but it actually lures sailors to their deaths upon the reef surrounding their island. “There is no homecoming for the man who comes upon them unawares,” Odysseus is warned.
Before he sails past, Odysseus stops up his crew’s ears with wax so they can’t hear the songs, and has himself lashed to the mast so he can hear them without destroying himself and his ship. If he wants to return home to Ithaca, he has to be ready for enticements that will keep him from getting home.
In the same way, investors need to understand and prepare for the siren-songs that can shipwreck their own portfolios. Investing is an odyssey, and investors will have all kinds of adventures along the way. Some are pleasant and some are more challenging. The investment policy is a chart that can keep us on course. Staying within our field of expertise, maintaining enough liquidity, resisting the temptation to extend maturities or go down in credit when spreads are tight and bond yields are low—these are traps that we can fall into if we aren’t prepared.
Investing can be simple, but it’s never easy. If we want to sail beyond the sunset, as Tennyson puts it, we need “to strive, to seek, to find and not to yield.”
Douglas R. Tengdin, CFA
Chief Investment Officer
Leave a comment if you have any questions—I read them all!