3 financial pearls of wisdom from the works of William Shakespeare

Few writers have captured the collective imagination and the reality, hilarity, and tragedy of being a human, quite like William Shakespeare.

The Bard of Avon remains unparalleled in his ability to find poetic expression for profound truths applicable to every domain of life.

So, as the 23 April is National Shakespeare Day, what can you learn from his works and characters about financial planning?

Read on to discover 3 financial pearls of wisdom from the works of William Shakespeare.

The Merchant of Venice and risk management

In The Merchant of Venice, Antonio borrows money from Shylock to help his friend court the wealthy heiress Portia. However, when Antonio’s merchant ship fails to return, he is unable to repay the loan and Shylock demands a pound of his flesh as collateral.

It is safe to say that Antonio did not sufficiently evaluate the risks involved in his endeavour. There was always a chance his ship would run into bad fortune and he would not be able to return the money, meaning he would have to sacrifice a pound of flesh and likely die as a result.

Risk management involves analysing the potential risks to your finances and ensuring everything is in place to protect against them, and Antonio would have certainly benefited from such an approach.

For example, diversification is a key component of risk management, as it ensures that your investments are not all held in one asset class, industry, or region. This means that should one area of your investment portfolio dip, your overall financial standing may remain robust as you have diversified your wealth.

Had Antonio diversified his finances, instead of relying on the returns of one ship, he might have avoided the calamity that ensued from his inability to repay the loan.

Although Antonio ultimately avoids paying his debt, The Merchant of Venice serves as an excellent reminder about the pitfalls that could await you if you don’t manage your risks appropriately.

Macbeth and the value of long-term growth over short-term gains

Macbeth is one of Shakespeare’s best-known works. It tells the tragic story of Macbeth’s grisly rise from Thane of Glamis to king, and his downfall caused by his unrelenting pursuit to get there.

The key traits to Macbeth’s downfall are his lofty ambitions and his impatience to achieve them. The prophecy of the three witches – that he will one day be king – easily influences Macbeth and he sets out to make their visions a reality as quickly as possible.

Much like Macbeth is tempted by the prophecy to pursue a violent path and become king, when it comes to your finances, you may be tempted to pursue investments based on the current trends or the latest noise. Our recent blog about the benefits of evidence-led investing discusses this in more length.

However, it is often the case that focusing on long-term investments could lead to more consistent and stable returns.

Nutmeg reports that if you had invested in the stock market for 24 hours on any random day between 1971 and 2022, you would have had a 52.4% chance of making gains. Yet, if you invested for a full quarter, your chances would have risen to 65.6%.

Investing for a year would have increased your chances to 72.8%, while 10 years would have raised the odds to 94.2%.

The evidence suggests that leaving your investments alone and giving them time to grow could be an effective tactic for seeing stronger returns.

Macbeth would have done well to ignore the “noise” of the three witches and focus on his long-term growth rather than trying to capitalise on the short-term profit of climbing the ranks, only to dramatically fall after having done so.

King Lear and the importance of estate planning

Often regarded as one of Shakespeare’s finest works, you can read King Lear as a parable about unchecked power and how a lack of self-knowledge can lead to chaos and tragedy, but it also has a lot to say about the value of planning your estate.

The play centres around the ageing Lear’s decision to retire and his determination to split his kingdom among his three daughters, offering the largest portion to the one who loves him the most. When his youngest daughter, Cordelia, refuses to flatter him, Lear disinherits her and leaves everything to the dishonest and cruel Goneril and Regan.

This sets off a cycle of catastrophic events, culminating in the King’s downfall.

What was true then, remains true now, and estate planning is a key component of your financial plan that can determine the stability of your family both during and after your life.

Recent figures reported by the Guardian show that inheritance disputes are on the rise. This is due to several factors, a key one being that the value of estates is increasing.

To do your best to avoid any Shakespearean familial disputes, you might consider writing your will early and ensure you update it after any significant life event. You may also want to talk to your family about your intentions, so none of your plans come as a surprise to them or so they can inform you of their thoughts and insights.

One of the key factors missing from Lear’s decision-making was advice. As the King, he saw that his word was final, and he ultimately paid the price of his hubris with his life. Seeking advice can be helpful for broadening your perspectives and understanding all the options available to you.

So, speaking to a financial planner could be beneficial for ensuring you plan your estate in a manner that best suits your objectives.

Get in touch

A financial planner can help you to build a plan with risk management, long-term vision, and your estate plans at its heart, ensuring you do not suffer the same fate as some of Shakespeare’s greatest creations.

To speak to a financial planner, get in touch.

Email us at hello@vwmwealth.com or call us on 0141 229 4004.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

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