How to be a Masters Champ at Investing

Apr 2022

The Masters Tournament is professional golf’s equivalent to the Super Bowl.  It is the first Major (out of four) golf championship of the year, and it dates back nearly 90 years.  It is a grand spectacle of an event, with week-long activities leading up to the actual golf, played over four days.

This year’s Masters was especially thrilling because we saw the return of Tiger Woods (his third comeback!) from near-fatal auto injuries and a first-time winner Scottie Sheffler, a rising Texas-born star.  Sheffler came into the tournament winning an astounding four of his last six golf tournaments and ranked the #1 golfer in the world, a rare feat.  At Sunday’s press conference, Sheffler was asked various questions about his incredible win and how successful he’s been over the past two months.  Most of his answers centered around being prepared, having patience, and dreaming of being in the moment.  He also said that even if he shot an 82, it wouldn’t have changed how he approached the game.

I immediately thought that investors could embrace his attitude to become better investors.  Too often, investors are looking for get-rich-quick strategies or big home runs.  Sometimes, just being a regular investor with a long-term plan is the best way to meet your financial goals.  The game of golf brings many lessons, including financial lessons.  Here are a few that we can take away from The Masters:

Don’t Overreact – To Bad Shots

It is ok to make mistakes periodically during your investment holding period.  Things happen that affect our thinking and decision-making.  We can get caught up in the moment when rationality escapes us, which usually occurs during market declines.   We know that staying the course is the right approach historically, rather than going more conservative by increasing bonds and cash during stock market drops.  Realizing your mistake and fixing it sooner than later so you can recover from it, is critical.  Despite some erratic shots, Sheffler still made it to a historic victory.

Dial Down Expectations – Hitting Straight Drives

Unlike in golf, where hitting drives down the center of the fairway are helpful, being a successful investor means you can be off-target periodically and still achieve your financial goals.  For example, portfolio declines don’t mean you cannot retire comfortably.  We know markets decline occasionally but eventually recover.  Overreacting to drops and bull markets can cause investors to make changes they might later regret.

The Miracle Shot Isn’t Necessary – Hole in One

An ace is the ultimate golf shot!  Unfortunately, the odds of making a hole-in-one for amateurs are 12,500 to 1!  For pros, it is 2,500 to 1, which is still incredible.  With the odds low, I equate them to investors trying to time markets by shifting their money in and out of stocks and bonds when fear overwhelms them.  The odds of getting it right might be slightly better than making an ace, but they are both slim.

Market timing, regardless of one’s reason, is fraught with problems.  They have to be right twice—when to get out of the market and when to get back in.  The latter is the trickier decision, which typically causes unnecessary stress and poor returns.

Becoming a Masters Champ at investing is not an impossible feat.  You may not need to accumulate a million dollars nor achieve 20% per year returns to achieve your investment goals.  However, keeping your expectations in line, balancing emotions, and maintaining unwavering patience go a long way to making you a better investor.

 

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