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Index Of The Seven Deadly Sins Links:
Although popularized by the epic poem, The Divine Comedy
The version I am using as the basis of this series of posts will date back to the 6th Century AD using the nomenclature of the Catholic Pope, Gregory the Great.
These sins are ordered from the least deadly to the most egregious (and this series of posts will follow the same ordering).
The third Deadly Sin was coined Avaritia (later donning the name of Greed)
Although this sin is listed third out of seven in the world of theology, in the financial world I think this sin deserves a far worse ranking.
Many a fortune has been lost because of greed.
The cardinal sin of greed causes you to never be satisfied with what you have.
“He who is not contented with what he has, would not be contented with what he would like to have.” – Socrates
When the oil baron John Paul Getty, who at the time was the richest man in the world, was asked what would it take for him to feel secure, his response was, “More.”
Getty’s pursuit of money was so all-encompassing that he even had the audacity to install a pay phone in his mansion so that his guests would not make phone calls on his dime.
“The lust of avarice as so totally seized upon mankind that their wealth seems rather to possess them than they possess their wealth.” – Unknown
It is easy to succumb to Greed, epitomized by the acronym, FOMO (Fear of Missing Out).
When the Bitcoin phenomena was being splashed throughout all media platforms regarding how many individuals became instant millionaires, there were more than a few individuals who bought into the hype train and jumped in.
These individuals were chasing performance, afraid of missing out, and had greed as the underlying cause of making these sometimes rash financial decisions without due diligence.
There was a small part of me that indeed wanted to buy bitcoin because I thought I would be kicking myself later if someone else made the millions that I could have.
I did not understand bitcoin and its underlying fundamentals.
Instead I wanted to jump in with everyone else in the bitcoin craze so that I too would not miss out on this opportunity.
Fortunately I did not go through with this initial impulse but I guarantee you there were many in my situation that did not show the same restraint.
Greed can make you stay in riskier allocations in hopes of getting even higher returns even though you may have, as William Bernstein puts it, “already won the game.”
The problem with this line of thinking is that at some point the piper will be paid.
During the next market correction that will, not if, occur, those that would have remained financially independent had they scaled back earlier on risk may now find themselves dropping down a color or two in the wealth zone.
“Only when the tide goes out do you discover who’s been swimming naked.” – Warren Buffet
Do not overexpose yourself because greed has you chasing every ounce of return the market can possibly provide.
Greed is the fuel that fans the flame created by wall street talking heads spouting off which stock is the next one to take off.
How far do you think the TV ratings for Jim Cramer’s Mad Money would plummet if his approach was to calmly extol the virtues of index investing?
That would make for boring TV.
Greed can also cause us to make questionable decisions in order to “maximize” gain such as trying to time the market.
“And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful” – Warren Buffet2004 Annual Shareholder Letter.
Market timing is a fool’s errand because in essence you have to be lucky twice:
- Have to sell at the market high
- Have to buy at the market low
Greed instead wants us to do everything we can to find the next hot tip so that we can go all in and make more than our brethren and their boring passive investing ways.
Greed destroys any concept we have of enough because nothing is ever enough in greed’s eyes.
“Greed is a fat demon with a small mouth and whatever you feed it is never enough.” -Janwillem Van De Wetering
The corresponding heavenly virtue of Charity is meant to counter the ill-effects of Greed.
We all know the old adage, it is better to give than to receive.
In my experience I truly find that to be the case.
I get more joy giving an item or experience to someone much more than I would get if I instead chose to treat myself.
This is why so many billionaires choose to give their fortunes away.
These charitable acts bring much more happiness to them than sitting on piles of money that they could not possibly ever spend.
Hopefully by now you realize the damage that greed can do to your financial well-being and plan countermeasures accordingly.
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Sometimes I wonder (cynically) about how much Jim Cramer’s net worth really is. If he’s gone all in on these stocks he hypes (including the buying and selling), he’s traded very inefficiently.
That got me to chuckle. The trading fees alone would eat up profits (and of course his Must Buy picks would likely cause him to lose money on their own merit)