23 Jan 2015 How to Win the Investment Game
Today’s post marks a milestone for the Friday Brief as the 600th issue of a weekly series that dates back to June 29, 2001. Thank you so much for your loyal readership.
In appreciation, I’d like to share some pearls of investment and planning wisdom picked up over more than 32 years of gainful and painful experience. Given the topic is about ‘winning,’ who better to deliver the pearls of wisdom than the late legendary basketball coach John Wooden, a man who knew what it took to win, both on the basketball court and in life.
From 1964 to 1975 Coach Wooden led ten UCLA men’s basketball teams to NCAA championships, seven of them in a row. This record will likely never be bested. Adolph Rupp (retired) of Kentucky and Coach Mike Krzyzewski of Duke each have four NCAA wins to their credit. Coach K is 68 years old. Coach Wooden retired at age 65, but at age 93 said he wouldn’t mind coming back as an assistant who could help players with practices and other light duties.
What made Coach John Wooden and his teams so successful on the basketball court? The answer, first and foremost, was his outlook on life that continues to shine through his words. Another of his secrets was his absolute attention to detail; the fundamentals of the game and of life.
Let’s follow Coach Wooden (in bold quotes throughout) as he hypothetically lays out his game plan for winning the investing game.
“I discovered early on that the player who learned the fundamentals of basketball is going to have a much better chance of succeeding and rising through the levels of competition than the player who was content to do things his own way. A player should be interested in learning why things are done a certain way. The reasons behind the teaching often go a long way to helping develop the skill.”
“If you don’t have time to do it right, when will you have time to do it over?”
“Failing to prepare is preparing to fail.”
In our financial lives, having a game plan is the most fundamental element. Without it we wander aimlessly and chase temporary distractions that draw us away from ultimate victory. Financial goals provide points along the way for measuring our progress. The points enable us to identify opportunities and threats that otherwise go unnoticed in the busyness of life’s games. “Don’t let making a living prevent you from making a life.” Know and plan what you are working and investing for.
“Each of us has a huge capacity to learn and to achieve. Being ever alert makes the task of becoming all we are capable of becoming so much easier.”
“Concentrate on what you do have, not on what you don’t.”
“Do not permit what you cannot do to interfere with what you can do.”
Financially speaking, the plan not only provides a framework within which we inventory our resources, abilities, and commitments, but it provides the ability to measure our progress, our learning, as we move toward achieving our ultimate capabilities. By alertly focusing on the things that matter, the things that propel us toward our goals, and ignoring or putting second those things that don’t, we vastly improve the odds of reaching our highest aspirations.
“Things turn out best for the people who make the best of the way things turn out.”
“Failure is not fatal, but failure to change can be.”
“We can plan a roadtrip or a workday down to the last detail but the unexpected will always arise. If we are not malleable, we will get left behind.”
We should count on, even plan for uncertainty in life and in markets. If we cannot adapt, and if our plans are not flexible, we invite failure to win.
“I grew up on a farm. We learned that there was a season to plant, a season to water, and season to harvest. The planting and watering could be laborious, but without those stages, there would never be a harvest.”
The nitty-gritty of life purpose investing includes work, saving, rebalancing, and updating the plan. It’s not always fun, but without these elements the bountiful harvest will not come.
“It’s the little details that are vital. Little things make big things happen.”
There are three aspects of investing that can be controlled: taxes, expenses, and under-performance. Each can be so small (or well hidden) that we may not even know they are occurring. But anyone who has not taken steps to curb them is sharing way too much of their wealth with the US Treasury, Wall Street, and inefficient mutual funds and managers. Plug the leaks from these unnecessary wealth takers, and improve your lifestyle both now and later in BIG ways.
“A coach is someone who can give correction without causing resentment.”
A good financial advisor/planner is our coach for financial success. No matter how diligently we work, save, invest, or plan, there is always room for improvement. We all tend to let ourselves slide in the areas we like least or perform poorly. A caring, yet objective advisor can hold us accountable to our plans and commitments while informing better ‘play’ and cooperation along the way. After all, it is OUR game to win or lose.
“Never mistake activity for achievement.”
This statement is one of the most profound in the arena of personal investing. People spend years chasing returns by searching for herd-leading managers, mutual funds or hot stocks, with little or no life purpose in mind beyond piling up large sums of money. “If you keep too busy learning the tricks of the trade, you may never learn the trade.” Sadly they never realize how much more life they could have had if they had focused on achievements worthy of their abilities.
“Good things take time, as they should. We shouldn’t expect good things to happen overnight. Actually, getting something too easily or too soon can cheapen the outcome.”
Investing should never be confused with entertainment, but that’s easier said than done. We are a get-it-now culture that thrives on immediate gratification. When large returns come quickly, we naturally enjoy them and want more. But if we shape our investment programs to provide for those good feelings on a regular basis, we will eventually become sorely disappointed. Markets are uncertain and unkind to poorly constructed, gain-seeking portfolios.
“I never yelled at my players much. That would have been artificial stimulation, which doesn’t last very long. I think it’s like love and passion. Passion won’t last as long as love. When you are dependent on passion, you need more and more of it to make it work. It’s the same with yelling.”
An investment portfolio designed to meet the uncertainty of markets may not provide the most exciting returns, but it can confidently provide the wealth required to meet or exceed important life goals when or before planned and mitigate the declines sufficiently to make staying with the plan much easier.
It’s not money that gets us in trouble, rather it is the passion for it.
“We don’t have to be superstars or win championships…. All we have to do is learn to rise to every occasion, give our best effort, and make those around us better as we do it.”
Have a great weekend and enjoy some basketball.