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How to never worry about the share market

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The Ulysses Contract doesn't sound like a book about investing. The subtitle "How to never worry about the share market again" is what grabbed my attention.


The book is mostly about the mindset and strategy of investing in shares. The obscure title refers to Greek mythology, the temptation of the siren songs, and the measures Ulysses took to keep his ship and crew safe - including being tied to the mast of the ship, to hold himself to his own plan.

In the book, Michael Kemp outlines the temptations (siren songs) in the share market, gives some solid guiding principles (the mast) that investors can secure themselves to, and outlines his idea of a Ulysses contract for investing.

The temptations include

  • spending too much on consumer items (it's hard to invest if we spend all our income)
  • doing what everyone else is doing (when the crowd is selling, it might be the best time to buy)
  • expert predictions (not worth that much, and can be wrong as much as right)
  • market-timing, stock-picking and day-trading (all quite hard to do, and we're unlikely to do better than average)
  • pin-striped suits (in most cases the fees investment companies charge aren't reflected in higher returns)
  • high returns with the latest technology (so many times the latest tech provides good short term returns - until the bubble bursts)

The mast includes principles of

  • diversification (having eggs in many different baskets)
  • reversion to the mean (crazy high and lows come back to normality)
  • history (some knowledge of history provides wisdom and can be an antidote to panic or worry)
  • patience ("human nature desires quick results" but "great operators do nothing in a hurry")
  • compound interest (over time, investments can really snowball)
  • great investors don't need to be champions (investing in a broad index fund can give a great results over time without being a genius investor)
  • passive management and low fees (high fees can erode the growth of an investment)

Farms not Casinos

This is one of the major principles of the author's mindset. Too often news media talks about share prices going up or down today, this week or this month. Short term wins and losses, like a casino.

Instead the author views investing like owning farms. Farmers don't sell the farm because of one month's bad rainfall. They own farms and reap a harvest year after year. His view is that this is how we should see investing. Work out how big a farm we need to supply our needs and build it.

Superannuation and Ulysses

The author sees Australia's superannuation system as a great example of the Ulysses contract. Our employer put money in regularly (we can too) and the fact that we can't touch it prevents us from messing it up.

In short

The Ulysses Contract is an easy-to-read book and offers guidance for everyday people who want to invest but aren't investing experts. The author focusses more on mindset more than the nitty-gritty of business and finance, because he sees mindset as far more crucial for investing.

Related reading

If you like the sound of this, then you might also want to check out The Latte Factor.

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