Christopher Nolan’s Odyssey is bringing Homer’s ancient Greek tale to a new audience. Written nearly 3,000 years ago, the story follows Odysseus on his long journey home to Ithaca, overcoming storms, temptations and impossible obstacles along the way.
While markets may look different from the ancient Mediterranean, many of the challenges investors face today aren’t so different. The Odyssey remains surprisingly relevant.
So, what lessons can this epic poem teach us about investing? The Parmenion Investment Management team takes a look.
Have a clear goal and focus on it
Odysseus has a clear goal, getting home to his kingdom. And he sticks with it. Even with the ups and downs of the sea, and the blockers in his path like giants, monsters and witchcraft.
For advisers, helping clients find their own Ithaca is often an important part of the planning process. This might be retiring in comfort, not running out of money, or leaving a legacy.
Despite the ups and downs of the market, their goals should remain constant. Though of course their priorities can change.
However, clients can sometimes lose sight of their destination. In the Odyssey, the lotus-eaters tempt Odysseus and his crew with flowers that make them forget their purpose. Clients can similarly get distracted and need reminding of their goals.
Avoid the sirens
In the Odyssey, the sirens sing to lure sailors away with promises that lead to their destruction on the rocks.
For investors those sirens could be speculative investment themes, market fads, recent scams or the temptation to chase past performance.
Odysseus survives because he has a plan before encountering them. Putting wax in the ears of his companions and tying himself to the mast.
In investing it’s less dramatic. But investors can choose to follow investment policies, diversify, and have a disciplined asset allocation. So, they’re not tempted to follow destructive trends.
We take a long-term view of markets and prioritise the consistency of returns, rather than taking big bets on certain asset classes. Strategic asset allocation remains central to how we seek to create value for clients over time.
Make those difficult choices
Odysseus must navigate his ship between two dangers. A six headed monster named Scylla and a giant whirlpool, Charybdis.
Investors must make trade-offs of their own.
Growth vs income, concentration vs diversification, inflation risk vs shortfall risk. And for us, with our risk forward investment approach, the big one. Risk vs reward.
There’s rarely a perfect option. There’s always a cost involved.
For investors approaching or entering retirement, this balancing act can be critical. Taking too much risk could expose clients to significant losses just as they begin drawing an income. Taking too little risk, however, can leave portfolios struggling to keep pace with inflation and the demands of a potentially decades-long retirement.
A particular challenge is sequencing risk. Poor market returns early in retirement can have a disproportionate impact on long-term outcomes when withdrawals are being taken at the same time. Recovering from losses becomes much harder when capital is no longer being accumulated but spent.
Successful investing isn't about chasing the highest possible returns or avoiding risk altogether. It's about taking the right amount of risk, at the right time.
Deal with forces outside of our control
Poseidon is angry because Odysseus blinds his son, the cyclops, Polyphemus and throws relentless storms and tempests at him. Odysseus can’t control Poseidon’s temper or the weather.
Investors can’t control recessions, inflation, interest rates, war, politics and market crashes. The peaks and troughs of stormy seas can be like the total return or drawdown chart.
What they can control are costs, asset allocation and behaviour.
Many investment failures don’t come from market falls themselves, but how people react to them.
Panic selling, frequent trading, chasing performance, hasty withdrawals. These are all things which investors can do to sabotage themselves when the storm hits.
In times when clients need reassurance, and a reminder of why their long-term plan remains appropriate, helping them stay invested until markets recover is where advisers add enormous value.
Have patience
Penelope, Odysseus’ faithful wife, waits for many years. As does his loyal hunting dog Argos.
Long-term investing demands similar patience. Compounding isn’t exciting, even though it pays off in the end.
The biggest rewards come to those willing to endure periods that feel unproductive.
And Odysseus doesn’t come home swiftly. He experiences repeated setbacks.
Investments never move in a straight line. They rise, fall and test your conviction.
Helping your clients reach their own Ithaca
Markets will rise and fall, unexpected events will occur and distractions will always compete for attention.
Success comes from keeping sight of the destination over the long term. Stay disciplined through uncertainty and avoid the distractions that lead others off course.
At Parmenion, that's the philosophy behind our Outcomes range. Through a risk-first approach, we aim to give clients the greatest possible chance of achieving the outcomes that matter most to them, helping advisers keep clients on course towards their own Ithaca.
It’s not the stuff of myth, it’s very real.
This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.
