The mistake made by budding baseball players is that they swing for the fences when a single will do. Their dreams of a home run often lead to the embarrassment of a strike-out. Not only are they red-faced, but the team effort loses momentum. This is the essence of winning by not losing. What is true in baseball is true in long-term investing.

The first step to “Winning by not Losing” is to know what causes losing. It’s a good idea to constantly remind retirement savers exactly how and when bad decisions occur (see “The Three Biggest Mistakes Retirement Savers Make During Down Markets,” FiduciaryNews.com, August 2, 2016).

But it goes beyond merely knowing what these mistakes are. We need to know why we are particularly vulnerable to committing them.

There are 147 “Delphic Maxims” said to have been inscribed at Delphi. Of these, the most famous is “Know Thyself.” This maxim appears frequently in Greek literature. Socrates is known have employed it as a way of explaining why he really didn’t know as much as people claimed he knew. (For this self-deprecation, Apollo’s Oracle at Delphi proclaimed Socrates the wisest of all because, unlike other pretenders, he “neither knew anything nor imagined” he did.) In other words, you can’t be smart until you admit you are dumb.

Yes, it’s important that retirement savers learn from common mistakes.

It is more important for retirement savers to admit they are just as capable of making those mistakes as the next guy.

This is where a coach comes in. Recalling our baseball analogy above, a good skipper will constantly remind hitters to moderate their batting strategy. Likewise, a good financial coach will constantly remind retirement savers to moderate their emotional reaction to market swings.

We all know emotions represent the greatest source of bad decisions. Nothing drives emotions like a volatile market.

Worse, alarmist media headlines create an environment that perpetuates a feeding frenzy of unhelpful emotions. The second step to “Winning by not Losing,” then, is to understand the emotions that push one towards making bad decisions. Fear (in falling markets) and greed (in rising markets) stand out as the usual suspects.

Introspection helps us find our faults in an honest way. Once we’ve identified them, we can learn to diminish their influence on our behavior. Here we find one of the more significant misapplications of research theory being practiced today.

In the specific area of “risk intolerance,” the popular treatment is to address this affliction by both accepting it and modify one’s investment portfolio so that it is sensitive to the retirement savers “risk intolerance.” There’s only one problem with this remedy – it repeatedly flies in the face of reality.

To achieve long-term success, most retirement savers will need to spend long periods investing in assets with greater price swings. This volatility can be unnerving, especially for the retirement saver that lacks awareness of not just market tendencies, but himself.

The temptation to change direction in the face of normal – but apparent “wild” – swings in the market may be too much for many. They need to recognize if they can’t discipline themselves they need to restrain themselves.

Visiting the Greeks once more gives a lesson of how extreme restrain must sometimes be. Odysseus, on his way back to Ithaca and his beloved Penelope, passed precariously close to the island of the Sirens. These creatures sang a captivating song no man could ignore and lured passing sailors who steered towards them to their rocky deaths. Odysseus knew this. He also knew he, being a man, couldn’t resist the tempting songs.

Nonetheless, he wanted to hear the beautiful music. Since he knew he didn’t have the discipline to avoid succumbing to temptation, he did the next best thing: He restrained himself. He had his sailors – whose ears were plugged with wax to prevent them from hearing the Sirens – tie him tightly to the mast. His ship sailed past the island of the Sirens without a hitch, and he got to hear their wonderful wails – and lived to tell about it.

Whether retirement savers embrace self-discipline or restraint, it remains critical that they “know thyself” well enough to avoid the rocky shoals of emotional reactions to short-term market events. As both Odysseus and baseball player know, this is the best strategy to reach home safely.

Instant Insights /

To achieve success, retirement savers must &ldquo;Know Thyself&rdquo;

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To achieve success, retirement savers must “Know Thyself”