In times of upheaval, uncertainty and market volatility, when fear often overcomes reason, it is tempting to follow the “Siren call” of “safe harbour” assets. Unfortunately, they are often likely to take you astray from your journey to your goals, while introducing perils that can wreck even the best built plans and portfolios.

Ancient stories, timeless wisdom

The ancient Greeks loved their stories. They told of great heroes and heroines, meddling immortals, evil villains and horrifying monsters, amazing feats and great failures, all in the service of providing lessons, parables and cautionary tales of how or how not to conduct oneself. Fortunately, despite the millennia in between, many of these fables have been preserved for us, especially the wonderful stories of Homer, The Iliad and The Odyssey. These great sagas told of the Greeks’ war with the Trojans (The Iliad) and of the 10-year journey home to Ithaca of the timeless Greek hero Odysseus (The Odyssey).

One of the most famous stories in The Odyssey is that of the Sirens and their enchanting but deadly “call.” As Odysseus sailed home from Troy, he was met along the way by a series of challenges and tests, most put in his way by vengeful gods. One was the Sirens, who lay in wait for sailors and their ships to pass, calling to them with their irresistible “songs” to come to them on their “safe” shore, instilling in them a kind of madness. Alas, there was only one problem: the shore was actually jagged rocks, upon which these captivated sailors’ ships would be smashed and they drowned (we don’t want to imagine what they would do to the ones who survived…). Odysseus, made aware of the Sirens’ deadly song, ensured that his men’s ears were properly plugged so they would be unaffected, while having himself lashed to the main mast, ears wide open. In the end, the ship passed safely, avoiding the peril, while Odysseus, restrained but listening, learned of the secret knowledge within the Sirens’ lunacy inducing call.         

A tale as old as time…

The story teaches us the importance of discipline, obedience, and teamwork; and, relating to Odysseus specifically, resourcefulness, the thirst for wisdom, knowledge and self-control.

As is often the case with the ancient Greek myths, these are lessons for us today. Making our way through our own life odysseys, we too are tried and tested by what life throws at us. Many times, the Siren call draws us to it, promising us things we want (or think we do), often using our base emotions of fear and greed to drive us away from our planned journey – and, in due course, crashing us upon damaging rocks.        

In turbulent and tumultuous times, in the face of wars and conflagrations, when markets respond with volatility, we are often overtaken by emotion and drawn to the Siren call of safety to avoid market downturns. Unfortunately, being drawn off course in this way can do lasting damage to one’s investment plan, causing us to miss important opportunities for recovery and returns that could make all the difference over time.

Beware false paths and perilous shores

Many of these “safe harbours” can seem innocent enough. There is nothing inherently wrong with holding cash, money-market funds and other short-term investments, such as T-bills. In fact, they can be absolutely the right solutions if your goal is to maintain a certain amount of your wealth for emergencies or to weather downturns in the market when you need to generate regular cashflow to meet your spending needs. They may also be appropriate for meeting near-term purchases or commitments. But when they are used to escape from or “hide” from market volatility, they can do real damage to your wealth building efforts.

The same might be said of other perceived safe havens, including gold and other “shiny” materials (e.g., silver, platinum), crypto currencies (e.g., Bitcoin, Ethereum), and short-term bonds. Each of these may have its place in a thoughtful, personalized, and professionally structured and managed portfolio that reflects your goals, risk tolerance, and investment profile.

However, finding “safe harbour” in them when things get bumpy can often be a different story. Gold, seen by some as a “store of wealth”, is notoriously volatile when in play due to various factors like the threat of debt devaluation and weakness in the U.S. dollar. Over short periods, it does not even maintain its value, but rather moves up and down like any other asset. Crypto currencies have been pushed by some as “the new gold”, however their recent performance has shown that they not only don’t hold or rise in their value when faced with volatile markets driven by global geo-political events and crises, but they plummet instead. Short-term bonds can see their value fall significantly and quickly if interest rates rise and/or investors start to worry about a government’s or a company’s ability to pay them back.

None of these “safe harbours” really work to preserve wealth in and of themselves, and in fact can work to imperil investors who are drawn to them in times of crisis. Instead, investors would be best served to listen to their own Odysseus - their Investment Counsellor - who has heard the Siren call, used their discipline, knowledge and resourcefulness to avoid its perils, but who have learned the ancient wisdom contained therein: staying true to your plan’s path is the wisest way to get you home safely.