On September 21, 1937, J.R.R. Tolkien’s novel The Hobbit was published by the British publishing house of George Allen & Unwin.
Publication marked a seminal moment in fantasy literature that paved the way for The Lord of the Rings series of books. Movies and television series followed decades later. The Hobbit follows the journey of Bilbo Baggins, a quiet and unadventurous hobbit who meets the wizard Gandalf and a group of thirteen dwarves led by Thorin Oakenshield. Bilbo joins them on a quest to reclaim the dwarves' lost homeland, the Lonely Mountain, and its treasure from the dragon Smaug. Along the way, they face numerous challenges, including trolls, goblins, wolves, and giant spiders. In one key moment, Bilbo separates from the group and discovers a magical ring that grants him invisibility. He also meets the creature Gollum, who possesses the ring but unknowingly loses it to Bilbo. Eventually, this motley group defeats Smaug, and the dwarves reclaim the mountain, but their greed for the treasure causes tension with the locals, who also seek compensation for their losses. A conflict nearly erupts until an even greater threat attacks, making fast friends out of near foes. Bilbo, having completed the adventure, returns home to the Shire, forever changed by his experiences but content to live a peaceful life again. The underlying themes of The Hobbit by J.R.R. Tolkien are rich and varied, exploring concepts of heroism, friendship, growth, and the battle between good and evil. Here are three lessons for the modern investor from the lands of Middle Earth: 1. The Hero’s Journey is not for everyone. Bilbo Baggins begins as a timid, comfort-loving hobbit but evolves into a brave and resourceful hero. The novel follows his transformation through trials, highlighting the theme of growth through adventure and adversity. And yet, when all is said and done (and in Tolkien’s works plenty is said / written), Bilbo decides to return to a quiet life and forget all about adventures. Bilbo Baggins was initially all for taking risks to get worldly and perhaps wealthy, the rewards seemingly well worth it. Then he endured those very risks and found the rewards insufficient to make him ever do it again. Understanding the Risk Premium, how much you would need to earn in return for exposing yourself to peril, is the key for those of us who are merely risking our personal fortunes and not our lives. Over the long term, taking on more risks should mean bigger rewards than taking few or more moderate ones, otherwise, there is no incentive to leave the Shire at all. Can’t handle the periodic adventures to the downside? Then it is okay to avoid them. Stay home. Be boring. But realize that without some risk, your overall returns are destined to be boring too, and so might the retirement for which you are saving. 2. Greed has its consequences. The desire for treasure, particularly the hoard of the dragon Smaug, represents the destructive power of greed. Thorin's obsession with reclaiming his ancestral wealth leads to conflict and tragedy, emphasizing how material greed can corrupt even noble causes. Investors tend to worry about risk when markets are frothy and focus on returns when the bourses are becalmed. They forget that the two are related. In other words, being greedy increases your risks at all the wrong times. 3. You can’t control all of the variables. Chance and fate play a significant role, especially when Bilbo finds the One Ring. Tolkien emphasizes the role of unseen forces guiding events for a greater purpose. This theme carries into The Lord of the Rings, where Bilbo’s discovery of the Ring has far-reaching consequences. Your decisions also have future consequences too. So be sure you know what you can control (planning, strategies, tactics) versus what you can’t (politics, market forces, volatility.) Focus on getting that one ring…I mean one thing…right. The relationships formed among Bilbo, the dwarves, and characters like Gandalf underscore the importance of companionship and good counsel. These bonds give Bilbo the strength to face his fictional challenges, but a good relationship with an advisor can help you face yours in the real world.
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Patrick HueyPatrick Huey is a small business owner and the author of two books on history and finance as well as the highly-rated recently-released fictional work Hell: A Novel. As owner of Victory Independent Planning, LLC, Patrick works with families and non-profit organizations. He is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Advisor in Philanthropy® and an Accredited Tax Preparer. He earned a Bachelor’s degree in History from the University of Pittsburgh, and a Master of Business Administration from Arizona State University. Archives
September 2024
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Patrick Huey is an investment advisor representative of Dynamic Wealth Advisors dba Victory Independent Planning, LLC. All investment advisory services are offered through Dynamic Wealth Advisors. You can learn more about us by reading our ADV. You can get your copy on the Securities and Exchange Commission website. See https:/ / adviserinfo.sec.gov/IAPD by searching under crd #151367. You can contact us if you would like to receive a copy. The tax services and preparation conducted by Patrick Huey and Victory Independence Planning are considered outside business activities from Dynamic Wealth Advisors. They are separate and apart from Mr. Huey's activities as an investment advisor representative of Dynamic Wealth Advisors.
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