Investors can learn from the all-stars
Next week, Major League Baseball’s All-Star game will be played at Citi Field in New York. If you’re a baseball fan, you’ll enjoy the annual gathering of the sport’s best players. And if you’re an investor, you may be able to take away some valuable lessons from the All-Stars — lessons that can prove valuable to you long after the game’s final out is recorded.
So, what can you learn from the All-Stars? Here are a few of their traits:
Consistency — All-Star teams rarely include ballplayers who are having one great year amidst a mediocre career; typically, All-Star players perform well every season. As an investor, you also want to seek consistent performers — those investments that, year in and year out, are likely to meet their objectives, whether those are growth, income or a combination of both. Of course, in the financial world, there are no sure things, so just like the best ballplayers, any investment can have an “off year.” Still, by sticking with quality investment vehicles, you should be able to improve the overall performance consistency of your portfolio.
Ability to avoid “errors” — All-Star players (apart from pitchers) are typically superior hitters, but many of them also have superior defensive skills — which means they make few errors in the field. And as an investor, you will definitely want to avoid as many errors as possible, because these mistakes can be costly. Some of the most common “errors” are chasing after “hot” stocks (they may have already cooled off by the time you hear about them), investing too aggressively and investing too conservatively.
Durability — The Major League Baseball season is 162 games long, which means that, over the course of six months, ballplayers play almost every day. And since baseball is a physically demanding game, injuries are common — yet, many All-Stars seem to make it through the entire season without missing more than a few games. When you invest, you will need plenty of durability as well. Over the course of decades, you will see some bumps in the road — periods in which the financial markets are struggling. During these times, you may be tempted to take a “time out” from investing. But if you do, you could miss out on the beginning of a market rally. The best investors stay invested, through “up” and “down” markets, following a long-term strategy and keeping their focus on their goals.
Flexibility – Not surprisingly, most Major League Baseball players are big, strong men. However, in recent years, many ballplayers — like other professional athletes — have discovered that various types of training, including yoga, can greatly increase their flexibility, allowing them to reduce injuries and play more effectively. As an investor, you, too, need flexibility in the sense of being able to adjust your portfolio, as needed, in response to changes in your life or in your goals. As part of this flexibility, you need, among other things, enough liquidity in your accounts to take advantage of new investment opportunities as they arise.
In all likelihood, you won’t be swinging a bat or throwing a ball in front of a national audience — but by following the above suggestions, you may be able to become an “all-star investor.”
Doug Drost is a certified financial planner for Edward Jones, 2262 Reno Highway, in Fallon.