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Investing–America’s Favorite Pastime

5/20/2017 9:06:39 PM by Morgan Wendlandt Edited for Todd Schneider Leave a Comment
I believe that there are a lot of life lessons to be learned from sports: dedication, determination, desire, and hard work, to name a few. These are all things that I want my Daughters to learn in their youth to carry with them for the rest of their lives.

With baseball season in full swing, I try to catch a few innings when I flip by a game on TV. The other day I was watching a pitcher give up hit after hit before he was eventually pulled from the game. I was again thinking of one of those life lessons learned from all sports: how to deal with failure. But you know, I also realized there are a number of lessons specific to baseball that can relate to the financial world. There are similarities between America’s game and Americans’ investment habits. In honor of baseball season, I thought I would share some of those with you.

The first is that you should not swing for the fences. As they say, swing for a hit, not for a home run. It is all about the singles. Baseball is a nine-inning game, and it is important to focus on doing the little things correctly, rather than putting all of your effort in one powerful swing. Of course, watching Joey Gallo crush a ball over the right field fence is exciting, just as it is in the financial industry—having a big hit on a stock return. But any dedicated baseball fan knows that more games are won on a series of singles than on a walk-off home run.

Similarly, having multiple strikeouts in your portfolio because you are trying for a big hit can cause you to lose the game. Think of it this way. If you have your portfolio invested with the goal of getting big gains, and it takes a 50 percent hit, you lose half your money. Even if you gain 50 percent the next year, you are still only at 75 percent of your original portfolio value. In fact, if you lose 50 percent like so many did in the last major downturn, you need to earn 100 percent to just get back to even. That is one big run deficit in baseball and one big portfolio deficit in investing. Folks, those homerun swings often leave you with strikeouts, but the consistent, level swings can have a much more powerful effect on the scoreboard.

Also, remember that big names don’t always lead to the best results, in baseball or in the financial world. In baseball, your first four batters might sell the most tickets, but having a well-rounded lineup of solid hitters and fielders can lead to better long-term results than investing only in a few big names. Likewise, investors are often drawn to well-known names in the financial industry, but that does not mean that those big names will have the highest returns. In baseball, as well as in the financial world, substance, skill and strategy are much more valuable than celebrity status or bravado.

Another lesson learned from baseball that can apply to all investors is to not let people get in your head. “We want a pitcher, not a belly itcher…” “Hey batter, batter, batter . . . ” Baseball is full of hecklers, big talkers and “Monday morning quarterbacks” (not to mix sports metaphors). The investment world is the same way. There are a lot of people with opinions, shouting the “best” advice at you. Just as baseball coaches get paid good money for their expertise, good financial advisors do, too. Don’t let the loudest voices throw you off your game. Meet with an advisor to design a strategy, create a plan of action for implementing that strategy, and trust in the strategy for long-term success.

Ask the right questions, such as, have we stress-tested my strategy to see how it behaves in good and bad times, or what mistakes did we make in the past and what changes do we need to make to avoid those same mistakes? This is just like a great baseball player will ask a coach how to make changes to improve on the prior season.

Lastly, create a routine so you are prepared for whatever comes your way. If you watch a baseball game, you will see routines all over the field. Batters do this before they step into the box, pitchers before every pitch, even fielders entering their ready positions. Every moment is treated the same, ready for whatever is going to happen. This is critical for your portfolio, too. No one is absolutely certain what tomorrow will bring, so have a consistent strategy and a routine that prepares you for anything. Be ready to take advantage of upswings in good times, and protect yourself from losses in the bad times. Folks, always stay focused at the plate and be ready for any pitch thrown at you.

You know, if you always think fastball, then adjust—in life and on the field. Because you need to be vigilant and stay alert; you never know when that curve ball is coming.

Questions? Comments? Ask Todd!





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The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by radical promoting and their editorial staff based on the original articles written by jeff cutter in the falmouth enterprise. This article has been rewritten for Todd Schneiderand the readers of Schneider Family Finance. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.


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