Madness lies in every human endeavor. It is most apparent in war, where people find it difficult to adhere to Sun Tzu's imperatives. Instead, they lose sight of their objectives, their principles, and even their own interests. The heat of the moment robs us of our ability to think rationally and to plan for the future, replacing it with shortsighted passion that, as often as not, ends up hurting us.
Nowhere is this behavior more apparent than the stock market. Two months ago, the market literally lay in ruins. Everyone wanted out. Traders made the long, painful trek to the New York Stock Exchange, so that they could sell, sell, sell on behalf of their panicking clients. The unexpected assault on the country had routed investors, who fled from the field and battened down in secure bunkers.
Now, the tide has turned. The Taliban is rapidly losing its last vestiges of power, Bin Laden is in hiding, and investors are charging. Treasury Secretary Paul O'Neill has confidence that the recently anointed recession is over, and that this will be a strong holiday shopping season. That confidence has driven the world's major stock markets well above the level they were at on September 11, even though they are down sharply for the year.
This ebb and flow occurred on a larger scale during the bubble and its subsequent popping. Investors confidently charge forward, only to realize that they've gone too far, and then they fly into retreat. The business media follows every step of the way like a chorus, lamenting the losses and cheering the advances.
It's impossible for me, formerly a professional classicist, to watch this and not think of Homer's Iliad. The Greeks advance to the walls of Troy, then get driven back to their ships. The Trojans look like they will burn the ships and doom the attackers, only to have Achilles re-enter the fray and drive back to the walls, laying the foundation for the subsequent capture of the city. Throughout it all, though, everyone -- except Hector -- loses sight of what they are doing. Madness rules, personified by Achilles.
Achilles allows his friend Patroclus to take his place on the battlefield, which he abandoned because of a petty tiff with Agamemnon, king of the Greeks. The war is almost lost in his absence. It is not the coming defeat that motivates Achilles to come back, however. It is the death of his dear Patroclus that drives him mad. His dementia is evident at the end of Book 19, when his horses speak to him (never a good sign):
This time we will save you, mighty Achilles,
This time -- but your hour is near. We
Are not to blame, but a great god and strong Fate.
--Book 19, 437-439, Stanley Lombardo's translation.
Achilles knows this. His mother has assured him that he will die on the fields of Troy if he kills Trojan hero Hector, the man who killed Patroclus.
I don't need you to prophesy my death,
Xanthus. I know in my bones I will die here
Far from my father and mother. Still, I won't stop
Until I have made the Trojans sick of war.
--Book 19, 449-452
Achilles wades into the battle, gets into a fight with a river, kills Hector, and drags his body behind his chariot. The disrespect he heaps on Hector, one of the only men of honor in the book, emphasizes how far gone Achilles is. In vilifying the corpse of a man who fought honorably for his family, Achilles debases only himself. He is no longer a hero, if ever he was. He has surrendered his whole reason for being at Troy in the first place, and he pays for it with his life. Getting caught up in emotion cost him everything, even though he achieved his short-term intentions.
So too it happens in investing. The point is to make your money grow for retirement. The trail to achieving this goal is quite clear -- it has been blazed by the great warriors and investors of the past -- and history lights the way.
- Only fight battles that you are sure you can win. This means buying stocks that you have strong, rational reasons for thinking will appreciate. Skip the penny-stock newsletters, the dentist's recommendations, and the Fool portfolio picks. Know in your own mind that your investments will pay off.
- Acknowledge current events, but let long-term considerations guide your investment thesis. Lots of people sold off in the panic of September 17. Some just got back in (after paying taxes), others stayed scared. There is no need to trade if the long-term outlook has not changed, no matter how horrific the day's news. Achilles should mourn Patroclus, but sacrificing himself did not bring him back to life.
- Don't let emotions rule your actions. Investing is not an exercise in debate, and it's not a team competition. Invest thoughtfully and rationally. Stocks don't love you, so don't fall in love with them.
- Enjoy peace. The stock market is the best long-term investing vehicle historically. If you aren't completely sure that you can beat it -- and very few people can beat it consistently -- then join it. Buy an index fund and forget about it. For most people, this is the best investing decision they can make.
Human psychology is a powerful force. Many emotions and events pull us in different directions. Overcoming the drive to act against our best interests takes patience and forethought. Do yourself a favor and take the time to assess your situation, your needs, and your limitations, and act accordingly. In all things.
Brian Lund makes a lot of bad decisions, but he's working on it. The Motley Fool is investors writing for investors.