Yankees great Yogi Berra once quipped, “90% of baseball is mental; the other half is physical.”
Math aside, Yogi’s point is well-taken: to excel at any sport on a professional level, mental tenacity counts for as much (or even more) than physical skills. Baseball in particular is not a game for anyone who is easily discouraged. If you get a hit 3 out of every 10 at-bats over the course of your career, you’re probably headed for the Hall of Fame. In fact, the all-time career batting average leader is Ty Cobb, who got a hit 3.6 times out of every 10 at-bats, and he last played nearly 100 years ago,in 1928. Obviously, baseball requires players to focus on their long game, and investing is no different.
When it comes to distinguishing a good hitter from a great one, what separates the two is often the hitter’s mental approach: strategy, perseverance, and the development of good habits. Let’s take a look at the most effective mental disciplines used by hitters and see if we can’t apply those lessons to our own investing approach.
1. Stick to a Routine
Baseball players develop a strict routine for training and playing, and then stick to it. They learn to tune out noise – whether it’s the fans in the stands, or other players on the field – and consistently practice their skills so that each game feels familiar and manageable.
Same goes for investing. It’s why we set up consistent contributions to your plan, and then review and analyze performance regularly, so we can see it all from a long-term perspective. That way we don’t get distracted by market volatility, media headlines, and other investing noise.
2. Remove Emotion
Imagine if sports pros let every jeer or taunt get to them, or if they decided a bad game spelled the end of their career. Pro athletes don’t rise to the top of their game when they let emotions take over.
Investing can also be an emotional experience, especially when markets rise and fall. But it’s critical to focus on your long term goals and avoid reacting emotionally. Having a financial plan in place and committing to it can help by providing a strategic, goals-based blueprint to follow regardless of how we’re feeling about money.
3. Wait for Your Pitch
Good players don’t just swing at any pitch; they wait for one in their sweet spot and then, hopefully, get a solid hit. Batters who swing wildly at anything thrown their way usually end up with a quick trip back to the bench.
Investors should also wait for opportunities that fit into their long-term investment strategies, and not just jump at the next hot stock pick. That takes knowledge, patience and letting a lot of bad pitches pass you by. Again, having a financial plan and sticking to it can really help take the guesswork out of which pitches you should swing for, no matter how tempting!
4. Control What You Can
A pro ball player can’t predict the weather, avoid harassment from fans at an away game, or foresee whether or not the opposing pitcher is having his best game ever. But he can study film and learn the strengths of the opposing team and their key players, he can work out to keep his body in top condition to (hopefully) avoid injury, and he can practice regularly to keep his skills sharp.
Likewise, there’s no crystal ball for investing. We can’t control major economic events, market swings, political turmoil or interest rate changes. But with a financial plan, the strategies we build and implement together can help prepare you and your future financial outlook for just about anything. On an ongoing basis, we can analyze current circumstances and determine what, if any, additional action is needed.
5. Pick Your Spots
Good hitters know when it’s the right time to swing away; they also know when it’s time to take aim, target the gap, and connect so their hit can bring the runner home from third base. More importantly, they know to look for a sign from their coach, who considers what’s best overall for the team.
That same teamwork and focus works for investors, too. Skipping the risky hot tips, popular IPOs and latest investing trends allows you to concentrate on the solid, long-term plays that are more likely to bring the results you desire. Working with us as your coach can help you make good financial choices, see the bigger picture, and score home runs to finally win the game.
Baseball and investing have a lot in common. The basic tenets – hard work, discipline and an understanding of your immediate situation and future goals – apply in either situation. If you’re wondering how best to apply these principles to your investment strategy, call us today. As an experienced “financial coach,” we’re here to help with any questions you have.