Investment Metaphor #12: Ancient Greek

Jul 3

Jul 3 Investment Metaphor #12: Ancient Greek

Several years ago I developed an interest in ancient languages, including Latin and Greek. While I found Latin grammar and vocabulary to be very easy to learn, I found ancient Greek to be significantly more difficult. With Latin, I quickly got to the point whee I could read primary texts in Latin without much need for a Latin dictionary or my Wheelock's Latin text. However, I never got to this point with Greek. What accounts for the difference?

The grammar of Latin and Greek are actually quite similar. Both Latin and Greek are inflected languages, which means that the ending of a word is modified based upon the word's grammatical role in a sentence or clause. For example, the phrase "I love" is the word is "Amo" in Latin. However, the phrase "You love" is "Amas" in Latin. Even English is a partially inflected language. For example, the words "who" and "whom" have different endings because they play different grammatical roles ("Who" is used for the subject of a sentence or clause, while "whom" is used for the direct or indirect object in a clause).

The thing that makes ancient Greek so difficult is the Greek alphabet (shown below):

With Ancient Greek I found myself struggling to make sense of words by sounding them out phonetically and by memorizing the symbols. Obviously this was an inefficient and painful process that held me back in terms of learning the grammar and the big-picture rules of the language. To learn Greek effectively, I had to learn to disregard the complexity of the alphabet and the symbols to focus on the language and its grammar.

Investing is similar to the ancient Greek language in this way. Like ancient Greek, the stock market has its symbols: letter codes to represent individual securities such as stocks and ETFs. And like the letters of the Greek alphabet, stock symbols can be confusing and complex to a new investor. The complexity of stock symbols, and of deciding which individual stocks to invest in, can hold the investor back from learning the simple principles behind long-term investing.

The first step in overcoming the complexity of stock symbols is to ignore them completely. That's right, do not even concern yourself with individual stocks. Long term retirement investments for most investors should consist of index funds such as ETFs (Exchange Traded Funds) or mutual funds. A single index fund such as SPY will serve just fine as a long term, buy and hold investment. Take a percentage of your income and invest in this single fund periodically, continuing to invest whether the stock market (and the plethora or individual stocks) is up or down that week, month, or year. Since the stock market has a long-term tendency to increase in value, so will your investments in the long term.

Many investors get overwhelmed (or excited) by the prospect of investing in the individual stocks represented by those ticker symbols they see on the financial news reports. Like the symbols in the ancient Greek alphabet, they can be a serious hindrance to the peace of mind of the novice investor. Just as I should have ignored the ancient Greek alphabet for the sake of learning the straightforward rules of Greek grammar, long term investors should ignore stock market symbols and learn the few basic principles it takes to invest for the long term using index funds.

Investing in the stock market for your retirement is simple and yields reliable results, as long as you don't make it more complex than it needs to be. If the stock market is all Greek to you, then congratulations; you are one step closer to being an investor. Ignore the market and its nuances, and invest in broad market index funds. It really is that simple.