Saturday 2 June 2012

Tortoise Investing

Right about now is when many investors will be scared away from the stock market, to the point of selling up and hiding in a cave (aka 'buying gold').

But if you are following the DIY Income Investor approach you will be - to some extent - insulated from the unfolding drama. No guarantees, but successful investing is often about adhering to a mental discipline ('mind over stomach') rather than being particularly clever.

So where does the tortoise come in?

You are probably ahead of me in one aspect - the fable of the tortoise and the hare. 'Slow and steady wins the race'. Interestingly, there are different ways of interpreting this well-known story: the hare got bored with a pointless competition or the tortoise was just obsessive (and possibly a little unimaginative).

Then there is the inherent defensiveness of walking around inside an impenetrable shell into which it can retreat in times of danger. Those of you with a classical education (!) may also recall the Roman military developed a small formation totally protected by shields, called the tortoise or testugo. That highlights a further feature of the tortoise - built for defence.

Then longevity. Tortoises generally have lifespans comparable with those of human beings, and some individuals are known to have lived longer than 150 years. So presumably, they have quite a long term view of the world. (According to Wikipedia, the oldest tortoise ever recorded, and one of the oldest individual animals ever recorded, was presented to the Tongan royal family by the British explorer Captain Cook shortly after its birth in 1777. The tortoise remained in the care of the Tongan royal family until its death by natural causes on May 19, 1965.)

Tortoises are also well known (in the UK at least) for their hibernation habit

Finally, most land-based tortoises are herbivores, consuming a regular diet of easily obtained green stuff, rather than being predators stalking their prey, which they may or may not catch.

So what might 'tortoise investing' look like? Here's my offering:
  • an attitude of 'get rich slow' as opposed to 'get rich quick'
  • a certain amount of obsessiveness, willingness to 'stay the course' or stick to an investment approach that may seem a bit boring at times
  • a cautious, defensive approach, with a cash 'shell' to withdraw into to protect you from unexpected problems
  • a long term, patient view, taking the 'lows' and 'highs' in your stride (perhaps focusing on the steady income stream the portfolio produces)
  • an ability to 'switch off' for a while (and ignore the frenetic markets)
  • a steady diet of green stuff (this parallel works better if you think of green dollars, possibly in the form of dividends)
  • a lack of aggression or testosterone, which is more likely to lead to risky investment decisions, although there is some evidence that testosterone is linked to better performance of stock market dealers; (interestingly, the etymological root of 'testosterone', comes from 'testis', which in turn possibly comes from 'testa' or 'shell')

Unsurprisingly, all the above is reflected in the DIY Income Investor approach.

Are you a 'tortoise investor'? If not, why not?

I am not a financial advisor and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.

1 comment:

  1. Its nice to see an investment blog actually dispensing sound, common sense advice for a change. Its a marathon, not a sprint, so take your time, don't panic, apply common sense to every decision, and don't expect to get rich quick. Great post, thanks. David Garner.