Wheel of Fortune?

Where are you on the wheel of fortune?

Wheel of Fortune. Source: Wikipedia

When I was growing up one of the most popular TV game-shows was “Wheel of Fortune.” Contestants would solve a word puzzle similar to “hangman” and spin a giant carnival wheel to win cash and prizes. The show has run for over 30 years. It’s appeal is that it encourages viewers to play along–to try and guess the mystery phrase before the contestants.

But before there was a TV show, there was another wheel of fortune, or rota fortunae. It’s a concept from ancient and medieval philosophy that characterizes fate, or chance. The goddess Fortuna would spin the wheel at random, changing the positions of those on the wheel. Some would suffer misfortune, others would gain windfalls. Fortune herself was blindfolded.

Wheel of Fortune woodcut by A. Durer. Source: Wikipedia

The concept has come down to modern culture, although Fortuna is sometimes replaced by Lady Luck. Jerry Garcia co-wrote “The Wheel” and performed it with the Grateful Dead in the ‘70s and ‘80s. In the TV series Firefly the main character notes “The Wheel never stops turning” several times.

It’s important for investors to understand the role of fortune in their portfolios. The investment world is not an orderly and logical place. Much of investing is ruled by luck. Every once in a while, someone makes an outsized bet on an improbable outcome that ends up working out and ends up looking like a genius. But whether a decision is correct can’t be judged just from its outcome. A good decision is one that’s optimal at the time it’s made, when the future is unknown. A good decision weighs the probable outcomes and measures potential risk and reward.

In sixth century Rome, the philosopher Boethius was awaiting trial—and eventual execution—on a trumped up charge. While in prison, he reflected on how to be content in a world beset by evil. He concluded that current conditions are always in flux—rolling on the rim of the Wheel of Fortune. The only thing we can control is ourselves. True happiness comes from inside.

Boethius imprisoned. Source: Wikipedia

In the same way, investors can’t control the circumstances of the market or the global economy. Market prices are always fluctuating. But they can control the quality of the securities they hold. Circumstances may be volatile, but economic values don’t change all that much.

The Wheel of Fortune is always turning, lifting us up or taking us back down. Bad things can happen to good companies. We need to look inside what we own to see what our investments are really worth.

Douglas R. Tengdin, CFA

Chief Investment Officer

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