Emulate athletes in financial life says Kochie
THE success of our brilliant Commonwealth Games athletes could teach us all a thing or two when it comes to money matters, David Koch explains.
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WE LOVE sport. We’ll watch anything that is played well. So watching the Commonwealth Games was two weeks of sporting heaven.
While we were enjoying some remarkable sporting achievements from the stands, we also marvelled at the focus, training and performance of the athletes. How they had prepared for success.
It had us wondering whether some of those same techniques the athletes use could be adapted to managing and investing our finances better. Interestingly quite a few cross over.
Their success has been built around some key principles and strategies which, you soon realise, can be easily adopted by all of us in building a winning financial plan.
So we thought we’d move away from everyday finance this week to look at the investing lessons to learn from elite athletes.
Stars can provide a foundation for success but the troops make the difference
The Hockeyroos, Diamonds, Opals, in fact most elite sports teams, are built around stars who are world class. They’re in a class of their own.
These superstars provide an important foundation for winning and a consistency of success. They deliver consistently high quality performances and, likewise, investors need to put elite star investments at the core of their portfolio and build the rest of their group around them.
That’s not to say you can throw darts at the board after that in the hope of landing the next Ariarne Titmus, because speculating is a dangerous game in investing. However, if you do have quality investments at the foundation, the other potentially rising stars can complement them rather than be relied on to carry the portfolio’s performance.
Having said that, don’t under estimate the troops. Those second tier investments in a portfolio can come with a little risk, and some inconsistency, but they can often produce stronger upside often from a low base.
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Constantly benchmark for success
Elite athletes and sports teams constantly benchmark their performance against competitors and themselves. While they want to obviously win, simply being better and showing constant improvement is just as important.
They set targets, and milestones, which reflect stages in their preparation or different times of year as they build up to an event.
Again, it’s the same with investing. Measuring performance of the entire portfolio and breaking it down to the individual investments. Benchmarking their role in achieving an overall result and whether their performance is as good as the competition. If not, then changes may need to be made.
Focus on the game in front of you
The old coaches’ cliche is to “take it one week at a time”. And while this sounds like a bit of a cop-out to avoid looking too far ahead, it’s a rock solid approach that carries weight in investing too.
As most athletes will tell you, there’s not a lot of value in dwelling on the past or looking too far into the future, because to deliver your best performance you need to be completely focused on the game in front of you.
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The same goes for smart investing. Don’t anchor your investment decisions in the past … whether that’s the price you paid for something or the past performance of a company … because that information rarely matters. Instead, put your energy into making the best decision for the future based on the situation you’re in today.
Yes have a big picture investment strategy to produce a “finals” like return, but the little immediate steps in-between provide the journey to the end goal.
Recruit coaches that complement your skill set
Just as every successful athlete surrounds themselves with a team of coaches and assistants, every investor should leverage the expertise of people who know parts of the investing world better than them.
A common theme from most post-race interviews at the Commonwealth Games was athletes thanking their coaches and support crew for playing a crucial role in their success.
This is particularly important for casual investors, who often shy away from seeking professional advice, even when they’re unsure about an investment decision.
It might be paying for property inspections or getting the guidance of a sharp equities adviser. Whatever the case, it’s crucial to recognise your strengths and weaknesses and use experts that complement your skill set.
And, if you can’t afford the very best financial coach, look for those who have worked for, and learnt from, the best.
Develop a style of play to suit your team
Similar to how the successful Ugandan netball team played a basic, but aggressive, style compared with the slicker sophisticated game plan of the Diamonds, you need to find an investing style that suits you.
This means building a portfolio according to your risk profile, age and goals. Recognise how comfortable you are taking on risk, plan your investments to deliver the financial support you need at different stages of your life, and set firm goals to work toward and guide the way you invest.
Only once you’ve bedded down this profile and worked out an investing style that suits, should you pick up the financial ball.
We both reckon we’ve become better businesspeople and investors from our short time observing elite sport through AFL and examining the Commonwealth Games.
Hopefully taking on board a few of these lessons, you can become a better investor from elite sport too.
Originally published as Emulate athletes in financial life says Kochie