To be or not to be calm? That is the question for investors

Instead of acting impulsively like Hamlet does, investors should remain calm in the face of uncertainty. La Trobe Financial shares three principles to guide investors towards prosperity, not tragedy.

By Andy McLean

Like many of Shakespeare’s greatest plays, Hamlet provides cautionary tales that still resonate strongly in contemporary society. We can learn a lot from the way Hamlet responds to the uncertain times he finds himself in.

After his father dies, Hamlet begins to question everything and everyone. Often, the young prince is frozen with indecision – frequently changing his mind about what to do for the best. At other times, he responds impulsively; spurning the loyal Ophelia and, later, accidentally killing her father.

Watching Hamlet storm towards his tragic conclusion, today’s investor community might pause for thought. Like Hamlet, they too are faced with an uncertain environment.

Last year, equities markets climbed the proverbial wall of worry and continued history’s longest ever bull-run. Investors enjoyed some really robust returns. Then, no sooner had the local market been shaken by Australia’s terrible bushfire season than the coronavirus began to carve its mark on global markets.

However, unlike Hamlet, investors don’t have to respond impulsively to uncertainty. That’s the message from La Trobe Financial CEO, Greg O’Neill: “At times like this, our view is that we all need to return to the fundamental principles of sensible investment. These principles can apply to all investors across all potential asset classes and levels of sophistication.”

O’Neill’s three principles show how investors can succeed by taking a different path to Hamlet.

1. Keep it simple

In his bid to be certain about his Uncle Claudius’s guilt, Hamlet orchestrates a highly complex plan that includes faking his own insanity and staging a play in the royal court. Needless to say, this does not end well.

Eschewing Hamlet’s complicated response to uncertainty, investors might heed the immortal words of Warren Buffet instead: investment is not like Olympic diving, there are no bonus points for degree of difficulty.

O’Neill says that if you don’t understand the investment that you are considering, simply don’t invest: “Thousands of investors over the years have been burned by the fine print of very complex investment schemes.”

2. Don’t keep all your eggs in one basket

Later in the play, Hamlet returns to Denmark with one sole purpose: to slay his errant uncle. In doing so, he becomes blinded to other challenges that may come his way. Laertes turns out to be a formidable (not to mention mortal) threat that Hamlet misses until it is too late.

Instead of putting all of your eggs in one basket, like Hamlet does, investors might look towards diversification as a safer strategy. “Diversification has been described as the one free lunch in investment,” says O’Neill. “A mountain of research proves that you can’t hope to time the market, but you can position your portfolio so that it is more resilient to difficult conditions like those that we’re seeing now.”

3. Don’t become greedy

Hamlet’s Uncle Claudius is so consumed by hunger for the crown and his new bride that he leaves his nation vulnerable to foreign invasion. He’s also too busy enjoying his success to appreciate just how badly Hamlet wants to take him down. Underestimating Hamlet proves to be Claudius’s undoing.

There’s a lesson here for investors: don’t become greedy. “There is always a new offering on the block promising extraordinary returns,” says O’Neill. “But track record and expertise matters. It’s often the only way that you can see how an offering will perform when markets turn against it.

“We all know the tale of the hare and the tortoise. Just remember – getting rich slowly never goes out of fashion.”

“Our view is that there is a strong place in all investors’ portfolios for capital stability and consistent monthly income,” says O’Neill. “We’ve been managing wealth since 1952 and remain the highest-rated and most-awarded manager in our space.”

Further details

La Trobe Financial was Season Partner for Bell Shakespeare’s 2020 production of Hamlet, and also Premium Company Partner for Bell Shakespeare.