People that love golf will tell you they love the challenge, being outdoors, and the relaxed pace golf offers. While golf and investing might seem like totally disparate activities, they actually share many similarities. If you can improve at one, it’s likely you can improve at the other.
Consider these similarities:
- It takes time to become skilled. Becoming a good golfer requires a lot of effort and time. So does becoming a skilled investor.
- Both require expert instruction to reach your potential. Even the best golfers have a coach. You might not hire expert instruction directly for your investments, but you can purchase books and other sources of information.
- It’s easy to get into trouble quickly. One golf shot into the water or out of bounds can be disastrous. One poor investment might not destroy your portfolio, but it can come close if you don’t handle the mistake quickly and properly.
Watch for hazards The golfers ... will have to navigate more than 200 bunkers at Oakmont Country Club. Most of them will wind up in the sand at some point or another, and how they respond to those hazards will likely determine their final standing. As an investor, the hazards you face over the years may take the form of market volatility or fluctuations – after all, markets are cyclical. If you find yourself in the sand, it's important to keep your cool and calmly determine the best way out. Think back to your strategic approach, and you will increase your odds of getting out of the bunker – or adjusting your portfolio – with minimal damage. (metrowestdailynews.com)
- To be successful, it’s important to control your thoughts. This doesn’t mean you shouldn’t be thoughtful and intelligent. It means that emotions can force you to make poor decisions. Nearly all investors have made at least one terrible financial decision due to emotion.
Regroup and move on – A bad shot can spoil a good round and a great day. The same goes for a bad investment. Don't let one bad decision turn into two or three or six. In the investing world, this means not throwing good money after bad. At P&A, we have a “down 20%” rule that tells us to sell an investment if it's down 20% from the purchase price. This takes the emotion out of the process and prevents us from falling in love with a company or stock. To summarize, cut your losses, learn from your mistakes, and don't look back. (pittand.com)
- Be patient. Hurried decisions are often poor decisions. Take the necessary time to make a good decision. Rushing a golf shot rarely turns out well. Jumping to conclusions about an investment leads to similar results.
- Sophisticated tools are not the answer. Golf technology improves by leaps and bounds every year. Courses that held professional tournaments in the past are frequently too short now to accommodate the better clubs and balls. However, the average player doesn’t seem to improve his score with this advanced technology.
Investing theories, tools, and software become more sophisticated each year, too. These tools have never been shown to improve the results of the average investor.
- Short-term results are not an indicator of long-term results. One great shot doesn’t mean you’re suddenly a great golfer. One horrible game doesn’t suddenly mean that you’re a horrible golfer. Just because a stock has gone up 10-fold in the last several years doesn’t mean it can’t go even higher!
- It’s all about risk management. The best golfers are great at hitting the ball, staying cool, and managing risk on the course. It’s not always easy to decide whether to lay up or to go for the flag. Risk is a significant part of investing, too.
Mind the approach As you walk up the fairway, it's important to know your strengths and weaknesses. Can you reach the green with your second shot? Or should you lay up short of the hole and play for the par? Just like in golf, investing entails balancing risk with reward. It's important to find a mix of investments that suits your desired level of risk and long-term financial plan. On some holes, the safe play might make more sense, while on others you have incentive to reach for the green. In both golf and investing, thinking strategically about your approach will improve your odds of long-term success. (metrowestdailynews.com)
- Casual advice is frequently bad advice. Every golfer has had a friend, stranger, or playing companion provide advice on his swing. Casual investing advice is about as useful. If you’re going to take advice, be sure to take it from a real expert!
- Know where you want to go. If you don’t know where you’re going, how will you end up in a good place? Each shot on the golf course requires a target. This target is chosen based on the obstacles and the location of the hole. Your investing must have a target as well. What are your investing goals?
In the game of golf, you compete with yourself. Knowing your own strengths and weaknesses puts you in a position for success. Should you go for the green from 210 yards out or lay up? In your daily financial life, as in golf, what you want to do and what you should do aren't always aligned. For most people, the road to financial freedom is paved by spending less than you earn while saving and investing for many, many years. Your primary competition in this process is yourself. (pittand.com)
Golf and investing might not seem to have a lot in common, but they actually do share many similarities. The same ideas that allow a golfer to become great will allow an investor to do the same. Planning, patience, and expert instruction are a great way to improve your odds of success.