The Sirens of Finance

Growing up, I loved the story of Jason and the Argonauts.  Something about the hero’s journey, and all the obstacles and opposition along the way, really captivated me.  As I got older, I grew a deeper appreciation for how these stories related to my own battles and my own journey and the nuggets of wisdom I could glean from these fables.      

If you are familiar with the story of Jason and the Argonauts, then you know about the Song of the Sirens.  These mythical creatures, the Sirens that lured sailors in with their song and beauty.  Distracted sea captains captivated by the Siren’s, veered off course to their demise, shipwrecked by curiosity and desire.    

Now, I am quite confident that none of us will ever have to navigate the treacherous seas while game-planning how to avoid the luring sounds of a cliffside Siren, but all of us will have our own life distractions (Sirens) that can lead us off course.    

Sailing analogies always seem so appropriate when talking about personal finance. In both cases, one finds themselves on a long journey in which small degrees of change can create drastically different destinations in the long run.  A financial mariner must map out his or her course and constantly recalibrate according to the variables that present themselves – wind, current, etc., or inflation, taxes, surprise expenses, etc.    

Today I’d like to discuss the Sirens of Finance.  I hope to provide awareness around these potential distractions and help you navigate smoothly to your intended financial destination.    

The Siren of Speculation

We are living in a season of our economy where speculation is rampant.  The headline news is littered with near-bankrupt companies with skyrocketing stock prices and cryptocurrencies originally created for humor that sees their prices go parabolic.  Everyone has a friend, a cousin, a friend of a friend, or an Uber driver that has shared about a BIG speculation win they had.     

I’m referring to speculation here as the belief that one can buy something today that is trending, popular, rising in price, and sell it in the near future for more than they paid for it.  Investing, on the other hand, is the belief that one can buy a business today that will improve itself [the business] over time, and that these improvements will equate to creating a more valuable business in the future, which in turn will increase the value of one’s original investment.  Speculation is a game of hot potato while investing is a game of monopoly – one depends on the luck of timing, and losers are determined at random. In contrast, the other depends on strategy and skill.    

Your financial plan should not depend on speculation.  The stories, the rumors, and the lure of easy money is a Siren.  The Siren of Speculation wants to lead you off course, and its desire is to shipwreck you financially.  The unfortunate reality is that for every celebratory speculation win that you become aware of, there are hundreds of losses you never hear about – some of these losses leading to significant financial destruction.    

The Siren of Performance

We live in a comparison culture.  The introduction of social media has amplified the old adage of “keeping up with the Joneses.”  We now know of every vacation, new car, restaurant visit, and so on that our friends, acquaintances, and friends of our acquaintances are taking part in.  It’s almost impossible not to benchmark our own lives against the constant barrage of social content we digest.    

When it comes to investing, it’s no different.  The access we all have to data today is incredible.  With the click of a button, you could populate the performance of thousands of strategies.  You could sort these results by time period, returns, risk/volatility, and so on.  It’s hard to imagine that people used to wait for the morning paper to see the recent price of their stocks.  

We also live in a very shortsighted culture.  You want your amazon package by the end of the day and your burger ready when you pull up.  Instant gratification is the name of the game.  You might give a new television show 15 minutes, and if it hasn’t grabbed your attention yet, it’s back to the endless library of streaming options.    

These two realities of our time make for a deadly financial cocktail – the mixture of access to endless performance data and an expectation of instant gratification.  This is the Siren of Performance; she sings her song and leads you always to chase the next shiny object.  You cannot commit to a long-term strategy because as different approaches come in and out of favor, you find yourself needing to attach yourself to yesterday’s winners.    

If you often find yourself being disappointed in your results, wishing you would’ve owned something else, talk to me, and I will frustrate you even more – I’ll show you something that did even better than the something that you wished you owned.  Good investment performance is important, it’s essential as it’s one of the key variables that will compound your wealth, AND investment performance can also be extremely distracting too.  There is a balance here, and if you don’t find that balance, this Siren will lead you to destruction.    

Orpheus  

In Greek mythology, there are multiple Sirens, each with its own name and story.  Today we talked about two Sirens of Finance, but we know there are many more.  On your financial journey, countless distractions will try to push you off course – overspending, excessive leverage, unaccounted for risk, underinsuring, etc.    

To overcome these Sirens, you not only need to be aware that they exist, but you also must gameplan how you will avoid them.  In our story of Jason and the Argonauts, it was Orpheus who saved the mariners from destruction.  Orpheus, the famed musician, played his music louder than the Song of Sirens and drowned out the opposition’s poisonous tune.    

You, too, will need your Orpheus, your counterattack, to drown out the noise of distraction.  We are all wired differently, and each of us will need to devise our own tricks and habits to help us stay on course.  Obviously, I am biased, but I am a firm believer that the right financial advisor can act as your Orpheus, and along with the right accompanying crew members, you can devise a bulletproof plan to help you arrive at your desired financial destination safely.    

The Bahnsen Group is registered with HighTower Securities, LLC, member FINRA and SIPC, and with HighTower Advisors, LLC, a registered investment advisor with the SEC. Securities are offered through HighTower Securities, LLC; advisory services are offered through HighTower Advisors, LLC.

This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors.

All data and information reference herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research is provided as general market commentary, it does not constitute investment advice. The team and HighTower shall not in any way be liable for claims, and make no expressed or implied representations or warranties as to the accuracy or completeness of the data and other information, or for statements or errors contained in or omissions from the obtained data and information referenced herein. The data and information are provided as of the date referenced. Such data and information are subject to change without notice.

Third-party links and references are provided solely to share social, cultural and educational information. Any reference in this post to any person, or organization, or activities, products, or services related to such person or organization, or any linkages from this post to the web site of another party, do not constitute or imply the endorsement, recommendation, or favoring of The Bahnsen Group or Hightower Advisors, LLC, or any of its affiliates, employees or contractors acting on their behalf. Hightower Advisors, LLC, do not guarantee the accuracy or safety of any linked site.

This document was created for informational purposes only; the opinions expressed are solely those of the team and do not represent those of HighTower Advisors, LLC, or any of its affiliates.

About the Author

Trevor Cummings

Private Wealth Advisor, Partner

Trevor is a Private Wealth Advisor focused on building customized financial plans for his and many clients of the team.

As the author of TOM [Thoughts On Money], Trevor endeavors to write and speak about financial concepts and principles in a kind of “straight” talk demeanor and posture.

He received his Bachelor’s degree in Organizational Leadership from Biola University and his MBA from California State University, Fullerton.

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