Market Turbulences
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Market Turbulences
We can learn from famous characters
who are known to project both positive and negative outlooks to the world in
the face of dilemmas. While Chicken Little screams, “The sky is falling,” leading everyone to believe disaster is
forthcoming, Shrek reassures the world, “Change
is good, Donkey.” Last week’s
Alberta election saw the toppling of
both the PC government that had been in power for forty-four years and the TSX Composite Index, frightening investors who have a stake in the province’s energy
sector. Some may have seen this as the
sky is falling while others took on the view that change is good.
On my recent trip to Medicine
Hat, known as “The Gas City” in Alberta, I didn’t see hordes of “For Sale”
signs posted on peoples’ lawns. Many jokingly predicted Albertans would move to
their neighboring province, Saskatchewan.
On the contrary, the scene in Alberta appeared to be “business as usual”
with people shopping in local stores, cleaning their yards, eating in
restaurants, and fueling their vehicles.
Supporting the economy in the usual ways appeared to be the norm.
The lesson to be learned from
this recent event is that markets will always react to change – both positively
and negatively. Even a change in a provincial
election can spur uncertainty. If there
is something investors do not react well to, it is “uncertainty.”
You need to be reassured about
the importance of sticking to your investment plan and weathering the market
storms. As the new golf season opens and
Canadians head onto the golf courses, this is an appropriate time to share the
correlation between golf and investing. David Cork presents the similarities in
his book, Bulls, Bears and Pigs (Published in 2005). Some information
never gets old. On the contrary, you
will appreciate the insight on how golfing and investing are related. Learning to maneuver around the sand traps
meticulously placed on a golf course can also be a much-needed lesson to maneuver
around the sand traps in unexpected investment markets.
Similarities between Golf and Investing
As a golfer, you fully understand
the challenges which come with playing the game. Understanding the value of learning
the game well helps you achieve the perfect score according to your standards. Investing
is similar. Understanding the value of strategies helps you achieve the perfect
returns from your money. David shares
eighteen similarities between golf and investing which coincidentally coincide with
the number of holes on a golf course. How intriguing! In fairness to the author and to entice you
to read more from his book, I will only share some of the similarities:
1st. Both golfing and investing are
counterintuitive. I know you are
probably asking, “What does that mean?”
Simply put, we do the opposite of what’s considered to be normal, the
way things are supposed to happen. David
shares:
“Think about it. With golf, you have to hit down to make the
ball go up. If you swing harder, the
ball generally doesn’t go as far. The
higher the number on the club, the shorter the distance the ball travels. It’s
hard to convince yourself to do what you need to be successful.”
“Now think about the most famous statement in
the investing world: buy low and sell
high. Completely counterintuitive. What this statement is saying, really, is buy
when things don’t necessarily look great and sell when they do look great.”
2nd. Starting early is beneficial. When you have a goal in mind, the importance
of beginning sooner rather than later will help you achieve that goal. David
links how this truth applies to both golf and investing.
“Both your investments and your golf game benefit when you have a head
start. With investing, it’s critical to
have enough time to allow interest to compound; with golf, starting young means
having time to develop the proper swing mechanics. But there are recourses in both golf and
investing if you do start late.”
“The resource is the same. You have to work much harder. I know great
golfers who came to the game late.
They’ve had to practice their tails off to get good. Now the key with investing is you have to be
prepared to catch up by contributing a larger percentage of your income than
you might have had to if you had started young.”
3rd. Pressure can take its toll on you as a
golfer and investor. If you put too
much pressure on yourself to achieve the perfect golf score, you likely will
not perform consistently every time you play. Likewise, the same can be true
about staying in the markets when panic overpowers you to exit at the first
indication of turbulences. David’s take on this matter is:
“Most people don’t perform well under pressure. I play with one guy who folds like a tent if
you bet a quarter on his next putt. Even
pros can fold under pressure. Once
they’ve mastered the game, they have to learn how to play under the intense
pressure of tournament golf. Some of the
most talented players don’t make the big time simply because they can’t handle
the pressure.”
“And many investors have trouble handling the pressure of market
fluctuations. Golfers need to deal with the pressure of key shots at all levels
of play. Similarly, investors need to
learn to cope with the stress of volatility, or they will forever struggle in
the market.”
His advice to deal with pressure
is: “If
you constantly strive for perfection, you’ll drive yourself crazy, and you’ll
never get there anyway. Know the game,
know yourself, and learn to play to your potential – then relax and enjoy the
process.”
Learning the Game
If you conduct a “Google” search about
similarities between golf and investing, you would be surprised to
discover the number of articles on this topic.
The remarkable fact is people write, sharing their knowledge from their
own experiences and others, to help you understand and learn the process. The secret to being successful, whether it is
learning to golf or invest, is to put into practice valuable lessons dropped
into your hands. If the investment markets
tend to frighten you, learning the game of investing will take away some of
your fears.
Here’s food for thought:
What you hear, you forget.
What you see, you remember.
What you do, you understand!
At today’s low interest rates,
you may have to jump into the markets simply to earn a higher return to fund
your dreams.
- Approach the markets with caution.
- Start slow.
- Learn by doing.
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