What do successful investors and professional sports have in common?
The Chicago Cubs know a thing or two about patience. After winning the World Series in 1908, the team and its fans waited another 108 years before they would win another World Series, in 2016. Not surprisingly, one of the keys to their success was that characteristic, patience.
Having discipline at the plate and waiting for the right pitch, the team led the league in walks last season1, something they had not done since Herbert Hoover was president.2
Investors could take a lesson here. Like athletes, they too lose sight of the ball, especially when they’re going through a slump. Just as even the most successful athletes inevitably experience a cold streak, financial markets have their own challenges, making it difficult for investors to stay focused on achieving their goals.
Patient investors, on the other hand, often rely on the following strategies to keep them on track:
- Long-term focus: The Cubs ended the 2016 regular season with 103 wins and 58 losses, but over the summer, they lost 9 out of 10 games. During that stretch, it would have been easy to abandon what had worked for them ear- lier in the season, but by reminding themselves of their long-term plan, and by sticking to their winning strategy, they ended the season as world champions.
- Discipline: Sticking to fundamentals and having a process is vital for success both on and off the field. For investors, this process includes setting an appropriate asset allocation and consistently saving at all stages of the market cycle (and not waiting for market clarity). In addition, they need to ensure that there are enough short-term cash reserves so they don’t have to make material changes to long-term investments. Finally, they need an advisor who understands their goals, investing time horizon for each goal and risk tolerance.
- Preparation: Before a game, many batters evaluate the opposing pitcher in order to anticipate what types of pitches they might face. By preparing themselves before they approach the plate, they are in a better position to know how to respond. The batter can’t control what the pitcher will do, but he can control how he responds, and what his actions will be. With financial markets, we can’t control whether we will be up or down, but we can determine how we respond to these fluctuations. Think about the last mar- ket correction and what adjustments were made to your investments, if any. Did those changes help you to reach your financial goals? What steps will you take next time the market corrects; and how can you pre- pare now before you step up to the plate?
- Coaching: Working with a financial advisor has helped countless individuals to stay focused when it matters most, and to provide the support needed to be a successful long-term investor. Investing can present significant emotional obstacles, and having a financial professional on your team can help. During times of market volatility, many investors find it tempting to simply throw in the towel. A good financial advisor will help to coach you through challenging markets and keep you focused on achieving long-term success.
While much of investing involves quantitative analytics and fundamental research, investors can reach their goals only if they are mentally, strategically and emotionally prepared for the ups and downs of financial markets. Staying patient by having a long- term focus, remaining disciplined, being prepared and working with a financial advi- sor can put investors in a better position to reach their goals. As the late Yogi Berra said, “Baseball is 90 percent mental, and the other half is physical.” 3
1 https://www.teamrankings.com/mlb/stat/walks-per- game?date=2016-11-03
3 https://www.brainyquote.com/quotes/quotes/y/ yogiberra162048.html
The HLS Group at Morgan Stanley is a financial advisory team with the wealth management division of Morgan Stanley in New York City. The views expressed herein are those of the authors and may not necessarily reflect the views of Morgan Stanley Smith Barney LLC, member SIPC, http://www.sipc.org. Morgan Stanley financial advisors engaged Worth to feature this article. They may only transact business in states where they are registered or excluded or exempted from registration, http:// fa.morganstanley.com/hlsgroupsb. Transacting business, follow-up and individualized responses involving either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made to persons in states where they are not registered or excluded or exempt from registration. The strategies and/or investments referenced may not be suitable for all investors. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNERTM and federally registered CFP (with flame design) in the US. CRC1740664 03/17
This article was originally published in the May–July 2017 issue of Worth.