Guest post by Contributing Editor, Robert P. Seawright, Chief Investment and Information Officer for Madison Avenue Securities.
I haven’t seen it yet, but I love the conceit behind the indie film Safety Not Guaranteed, which has opened to excellent reviews. The words of the title are found in a mysterious classified ad in a local paper seeking a partner for time travel. The ad also states that applicants will need their own weapons and, ominously, “safety not guaranteed.”
That’s a pretty good metaphor for investing and for life in general.
We know from behavioral research that we are highly risk-averse — we feel loss more than two times as strongly as we feel comparable gain. We crave safety. But safety can never be completely guaranteed.
In investing, safety is never guaranteed. Indeed, risk and reward are negatively correlated generally. On the other hand, by taking insufficient investment risk (in the sense of our potential to lose money), we run the (somewhat different) risks of not meeting our goals, of not being able to live as well in retirement as we would like, or of not leaving the legacy we desire.
When we come at things from a different angle, it’s easy to recognize that even if/when we have it, safety is not enough. We need more than safety and provision. We need meaning. As Steve Jobs pointed out in his famous Stanford commencement address:
“Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma – which is living with the results of other people’s thinking. Don’t let the noise of other’s opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.”
It is easy to be paralyzed by risk — to fail to make the trade, or decide not to go with the start-up, or not to have the guts to ask the girl out. These failings don’t make us or keep us safe. Safety is never guaranteed. Life (like investing) isn’t tame anymore than Aslan the great lion in the Narnia stories is tame.
When Lucy inquires about Aslan (in The Lion, the Witch and the Wardrobe), “Is he—quite safe?,” Mr. Beaver offers this penetrating reply:
“Safe? …Who said anything about safe? ‘Course he isn’t safe. But he’s good.”
Investing, like life and Aslan, isn’t remotely safe — safety not guaranteed. But it’s good (and necessary too).
About Robert Seawright and the Above the Market Blog:
Above the Market is the blog of Robert P. Seawright, the Chief Investment & Information Officer for Madison Avenue Securities, a broker-dealer and investment advisory firm headquartered in San Diego, California. Its focus is the capital markets, economics and personal finance from a data-driven perspective. His About Me profile is available here.
The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Madison Avenue Securities is not affiliated with FOLIOfn or The Portfolioist.