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Golf is Not a Game of Perfect. Neither is Investing.

  • Writer: Canterbury Investment Management
    Canterbury Investment Management
  • Jul 22, 2024
  • 4 min read

In lieu of a market commentary this week, we will be comparing investing to the game of golf. Our team at Canterbury just recently produced a podcast episode comparing golf to investing. Our podcast is called Investor Insights, and the episode is titled “What do Golf and Investing Have in Common?” The episode is under 15 minutes long and expands on some of the ideas covered in this article. It can be found on most major podcast platforms such as Apple, Spotify, and Amazon. You can also visit www.CanterburyGroup.com/podcast.


Anyone who has ever played golf understands how challenging the game is, and how it can test your mental fortitude and resilience. Sometimes, you feel like you’re in a groove: driving the ball straight, hitting crisp approach shots, and making putts. Other times, the game can be volatile, and nothing seems to go your way. In either situation, the game continues. Avoid blow-ups and make good decisions.  


Investing is a lot like golf. Sometimes, investing feels easy during a bull market. Other times, it can be a volatile ride of uncertainty. But investing is a lifetime activity. Just like golf, you must avoid blow ups and continue to make good decisions.


Avoid the Big Mistakes

There have been many investors who have had long-term success in markets, only to see years of savings and gains get wiped away by a bear market. It’s like having a great round going, and then taking a triple bogey on hole 18.


The Open Championship just occurred over the weekend, which reminds me of analogy. Twenty-five years ago (1999), Jean Van de Velde had played 71 holes of near perfect golf, resulting in three stroke lead heading into the 18th hole of the Open Championship. All he needed to do was score a double bogey (two over par), and he become the first Frenchman to win the Open since 1907.


On hole 18, Jean made a questionable decision to hit the driver off the tee box, rather than playing it safe. He sliced his shot onto hole 17. Next, rather than playing than laying up, he decided to go for the green with a 2-iron, hitting the grandstands and ending up in the thick rough. Before you know it, Van de Velde had his pants rolled up and was ankle deep in the water hazard trying to decide if he should hit his ball out of the water. He ended up taking triple bogey and losing the Open Championship.


For Van de Velde, 71 holes of great golf were ruined by one hole and a historic meltdown. Now unlike golf, investing doesn’t stop after 18 holes.  Your decisions, good or bad, compound over a lifetime. Thus, the larger your portfolio becomes, the bigger the dollar impact a bear market can have. It’s important to have an investment process.


Golf is not a game of perfect

Dr. Bob Rotella published a book titled “Golf is Not a Game of Perfect.” In this sports psychology book, Dr. Rotella argues that golfers become too focused on outcomes. They think about their score and the impact of each shot, leading them to become tense or overly aggressive. Every golfer out there has hit a bad tee shot. The tendency is to try to take a bad shot and follow it up with a heroic one. The reality is that most golfers will follow a bad shot with an even worse one. Sometimes, laying up can be the right decision.


Instead, Dr. Rotella encourages golfers to focus on the process, not the outcome. The golf process includes aspects of the game that align with what the golfer has control over such as strategy, setup, and technique. If you have a good, repeatable process, then success on the course will follow.


Just like in golf, investors can often become too focused on outcomes. Some investors tend to think “I need to average X% each year,” and then become concerned if that objective is not met. We know that markets rarely do what investors want or expect. Investors have no control over market fluctuations.


What can investors control?

So as an investor, what do you have control over? You cannot identify what market returns will be, but you can identify the risks in real time. Just like golf, investing is dynamic. In golf, the game is different every time you play it. The tee boxes move, the pin locations change, and the weather is always shifting. Sometimes you will have the wind at your back, and other times, it will be right in your face. Some days you might be hitting the ball straight, and other days you might be drawing or fading. You must adapt your game to deal with the conditions of the course that day.


Markets are also dynamic. You have periods of low and stable volatility, but also periods of high and unpredictable fluctuations. The investment portfolio that is most suited to do well during a low volatility bull market will look almost the opposite of a portfolio that works best during a bear market. The bottom line is that your portfolio needs to be adaptive to deal with changing market conditions.


Bottom Line

No one hits a good shot every time, and no investor just buys securities that only go up. On the other hand, don’t confuse luck with making smart decisions. Hitting a great shot into a tight area, or buying an aggressive stock that immediately takes off, can give a false since of confidence. Taking more risk does not mean you will get lower scores or higher returns. Instead, taking more risk increases the chances of blowing up. One blow-up can wipe out a good round or worse, it can ruin your long-term investment program. Consistency is the key to achieving predictable results. Have a well thought out strategy and maintain the discipline to make good short-term decisions.



 
 
 

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