The Fog of War: Lessons from Napoleon’s Defeat at Waterloo in Our Investment Battle Against COVID-19

Is your financial plan battle tested? The author describes how the “fog of war” can impair your financial decisions.

Last week, as I sat on a call with some of the leading experts detailing the stimulus afforded by the CARES Act to combat the spread of the COVID-19 coronavirus, I alternated between fighting feelings of hopelessness and hopefulness.

Our lawmakers are hoping that the legislation – a record-setting stimulus package – will stem the economic carnage. This week alone we saw 6.6 million Americans claim unemployment. 

Seemingly the news gets a little worse each day and every evening briefing brings us a fresh set of statistics and recommendations for how to battle and help to contain the virus. 

Everyone from those in Congress down to my 4-year old daughter wants an answer. When will it be all over? Will social distancing work? Heck, when is it ok to actually talk to my neighbor?

The uncomfortable answer is quite simple while extremely unsettling: We just don’t know.

This fact has not stopped people from predicting. There are “educated” guesses galore, from the talking heads on TV, to the CDC, to your Facebook friend Cindy who wields expert advice on what’s going to come next. 

In our current battle against the coronavirus and the subsequent economic fallout, we are experiencing something called the “Fog of War.” So, what exactly is this haze? 

Fog of War: A Definition. 

The fog of war (German: Nebel des Krieges) refers to the uncertainty in situational awareness experienced by participants in military operations. The term seeks to capture the uncertainty regarding one’s own capability, adversary capability, and adversary intent during an engagement, operation, or campaign. The fog of war is a reality in all military conflict.

Precision and certainty are unattainable goals, but modern military doctrine suggests a tradeoff of precision and certainty for speed and agility.

If you are a military history buff like I am, you’ve heard this term often and observed how it describes making accurate decisions during a battle which is naturally filled with imprecision and error. 

Normally, this “fog” is pointed to as a reason a particular commander made a very poor decision that led to disaster. History is written by the victors, and if that “victory” in hindsight may have seemed inevitable, so does the defeat. In those cases of defeat, we are left to scratch our heads and wonder…

“What the heck were they thinking?”

The truth is, they were doing just that – thinking. However, they were not doing so with a clear mind. 

The fog of war can lead some of the best minds to make mistakes whether it be a coach making a haphazard decision on the fourth down or a general deciding not to retreat and cut his losses. In both instances, the final tally on the scoreboard always shines bright on whether a decision paid off or was poor.

Napoleon wasn’t regarded as the best military commander for nothing, and yet he lost in spectacular fashion at Waterloo, a battle he was winning for 80% of the time until his infamous defeat.

Today’s Financial Fog of War

I’m certainly not a professional historian, but I’ve advised clients through major financial downturns like the Dot.Com bust and Great Recession, and I’m feeling a certain sense of déjà vu, not because the situations are so similar, but because the reactions and mistakes of investors are eerily similar. This got me to thinking:

Does the Fog of War mirror what we are encountering right now?

Are people experiencing their own financial fog?

If the Fog of War can defeat even the best of generals what chance does the average investor have

What can you do to battle your own hazy conditions?

Can this fog be avoided? Maybe, maybe not. However, we can surely arm ourselves against the effects of fog and uncertainty by identifying two specific issues that make us more prone to mistakes.

  1. A poor strategic decision made well before the battle that left an army exposed or weakened.
  2. An error in decision-making under duress that the leader, under normal circumstances, would never have made.

Ask yourself the following questions:

  • Has COVID-19 revealed any weaknesses in my financial life?
  • Is there something ingrained in my plan that is going to leave me exposed? 
  • Am I feeling so stressed that I believe my decision making on investing may be compromised? (answer this question only after you open this month’s statement)

The Importance of an Emergency Fund

In the attempt to address these errors, let’s focus on point #1 and talk about your current emergency fund.

Do you have one? How long will it last if you can’t make money or must take a pay cut?

I know a popular financial celebrity who wants you to leave 3 months of expenses in the bank, but given today’s circumstances, will that be enough? 

Let’s look to Napoleon and his disaster at Waterloo for guidance. 

In military terms, a substantial “emergency fund” is like keeping a reserve force well behind the lines and only committing that force to battle when a threat is imminent. As the “General” of your financial plan, you hope to never need to deploy your reserves, but you prepare nonetheless. 

At Waterloo, Napoleon’s adversary, the Duke of Wellington, was able to deploy reserves out of sight from his enemy, (remember this is 1814). He only deployed the reserves when things got dicey. He also had an advanced plan for his “emergency fund” for when the battle got out of hand. (Spoiler alert: it got out of hand!)

The CARES Act is designed to act as a backstop for millions of Americans who don’t have a choice and can’t work, aren’t allowed to work or were laid off/furloughed due to all of this. Certainly, that’s a good start. However, absent of more government intervention, who is going to bail you out if you need more reserves? What about the next time? There’s always a next time. 

Last year gave Federal employees quite a scare when the shutdown took paychecks away. This is something different entirely, but perhaps with the same ultimate effect.

Wellington was so adept at defensive fighting that he deployed his troops in a manner that defeated arguably the greatest military commander the world had ever seen until that point.

Check your reserves right now. If you are lacking and are still fully employed take action now

Can you save more money than you already are? Are you spending money on things that you don’t need? When’s the last time you checked your budget? No budget? Create one.

When things don’t go our way, and the proverbial fog is at its heaviest, it’s nice to know there are reinforcements we can call in.

What is Your Investing Strategy?

Let’s look at mistake #2. When was the last time you checked in on your TSP? 

Its performance is likely to be lackluster at the moment given the current market volatility, but what about its makeup, especially in relation to where you are in life? Is the design of your portfolio exposing you to potential panicky decisions? How much of the C, S and I Fund do you have? How much of the G and F fund?

Once again, let’s look at Napoleon and analyze his mistakes.

Rather than attacking British forces in the early morning, he waited several hours to commence the battle, reportedly breakfasting leisurely. This may have been due to the heavy rain and his reliance on his superior artillery. He must have felt he had spare time to allow the ground to dry, maybe because he underestimated the danger in front of him. Lastly, he may not have respected the skill of Wellington’s forces, despite knowing of their experience during previous wars.

He also underestimated how far away the Prussian forces were from Waterloo. Those forces would arrive by the late afternoon. 

Had Napoleon attacked Wellington’s British forces earlier and finished them off — which was possible due to his initially superior numbers — he could have faced off against the smaller Prussian force and defeated them separately. However, the arrival of the Prussian force at Waterloo led to the tired French forces being decisively outnumbered and attacked on multiple sides.

Much like a battle plan, a sound investment strategy is well planned in advance. It looks to attempt to anticipate not only what are the objectives, but what it may have to overcome to achieve them. It should have a strategic objective, a time horizon, be well diversified and account for your personal risk tolerance. But does it also account for failure or adversity?

You handle adversity in an investment plan by creating a pre-planned response strategy for when your original plan starts to falter. We call this loss tolerance. 

Loss tolerance is how much of your portfolio value you will endure losing and still hold the line on your investment strategy for the inevitable rebound, when it comes. 

To put this in perspective, no sane military commander would go into a battle with the expectation of zero casualties. Casualties and losses are an unfortunate reality of war and investing. If you go into battle as an investor who is overconfident and with no expectation of loss, the Fog of War will descend upon you like bees on honey. Here comes the panic.

To get through the fog, you must consider the cost of your actions and determine the price of “casualties” in advance. 

I’m guessing that you invested in stocks primarily for the potential gain over the long term. Your cost of committing to this action is frequent small market losses (5-10%) and the occasional massive market loss (25-30%). If long-term growth is your primary objective, victory will come in the form of 8-10% rates of return over many years in exchange for some extreme battlefield casualties.

This is easy to say but tough to follow. Anticipating losses on paper in the confines of a normal economy and normal life with no social distancing is easy to accept. The last decade of this market made it seem like casualties and market losses were a thing of the past. We may have become as overconfident as Napoleon. 

Remember this: the key difference between actual battle casualties and investment loss is that casualties in war are permanent, while in a portfolio they are temporary. These losses/casualties will remain temporary unless you act by selling and making them permanent. This is the exact point when emotional decisions under the Fog of War can make us susceptible to the huge, irreversible mistake.

One way to combat panic is to check not only your account balance but the shares of the C Fund, other mutual funds, ETF, or stock you own. You’ll be comforted to find out you own the same amount as you did two months ago. Your soldiers are still there, albeit with less ammunition.

Key Point

In the fog, it’s very easy to lose sight of the fact that the market will rebound, but we don’t know when that will be. We have studied the years and years of bear markets and the facts show we will often rebound. 

Don’t retreat from your long-term plan because the immediate future is cloudy. Give it time and don’t panic. Remember, for a long-term investor sticking through the highs and lows is not only key, it’s mandatory. The only person who gets hurt on a rollercoaster is the person who jumps off.


The last two months feels like an eternity. In February, the economy and the stock market were riding highs despite an impeachment saga that honestly feels like it played out when I still had hair. 

Although COVID-19 was truly out of left field, the economic downturn it’s causing is something we’ve faced before… and will again. Recessions and bear markets are natural and happen, just not recently.

Let’s take these lessons and resolve to use this crisis to shore up our own ‘armies’ amidst the fog that right now seems denser than ever. 

Life will go on, but we can always be better prepared. I leave you some advice from Napoleon himself. After all, he is considered the greatest general of all time, if he lost Waterloo. 

“Victory belongs to the most persevering”


The opinions and forecasts expressed are those of the author, and may not actually come to pass. This information is subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any specific security or investment plan. Past performance does not guarantee future results.

Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Mission Point Planning Group and Securities America are separate companies.

About the Author

With over 17 years of experience as a financial planner, author and educator, Anthony Bucci helps Feds ‘cut through the noise’ and make retirement decisions free from opinion, emotion and conjecture. Find out more about Anthony by visiting Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC.