Market News: 1/21/2020Submitted by Executive Wealth Management on January 22nd, 2020
Fear has many facets. The words timid and intimidate are derived from the Latin word for fear timor, which linguists believe ultimately comes from an older prehistoric root word meaning “to choke or to strangle”. These etymologies emphasize the debilitating aspect of fear.
However, the ancient Romans had another word for fear: metu, from which we get the word meticulous. This aspect of fear brings preparation instead of desperation, motivation instead of stagnation. This was a major focus of the legendary boxing trainer Cus D’Amato. A mentor to World Heavyweight Champions Floyd Patterson and Mike Tyson, D’Amato would give every fighter a lecture before he would allow them to get into the ring to spar:
“You must understand fear so you can manipulate it. Fear is like fire. You can make it work for you: it can warm you in winter, cook you’re food when you’re hungry, give you light when your are in the dark, and produce energy. Let it go out of control and it can hurt you, even kill you ... Fear is a friend of exceptional people.”
For there is no virtue in being fearless. One can be too dim-witted to see the dangers lurking ahead. When Dutch explorers first arrived on the island of Mauritius in the 16th century, they noted the exceptional lack of fear in one particular native creature: the dodo. Whenever they were hungry, the sailors could herd the large, flightless birds without difficulty onto their ship for a tasty meal. The dodo’s demise came quickly.
The Fearless Dodo Bird
Yet when we can see the potential difficulties on the horizon and, instead of panicking, prepare and plan, then important things can happen, whether its buying a new house, financing a child’s education, or funding a retirement.
Finally, there is one type of fear so prevalent in finance that it has its own acronym: the fear of missing out or FOMO. We’ve written in the past about how even the smartest people can lose their composure when they believe that everyone else is getting rich investing in some hot new security. FOMO is the fuel for market bubbles. It is always important to remember that for any new fad in the financial world, from cryptocurrency coins to Canadian cannabis companies, an investor must meticulously research the risks and rewards of the product before parting with their money.