Financial Lessons from Great Sports Figures

Great athletes are revered for their achievements and admired for their hard work and dedication. For kids they are an aspiration, and, for grownups, they are an inspiration. Many of the most profound quotes about life, commitment, success, and leadership are attributed to athletes who have endured the same pressures, hardships, and obstacles as everyone else to reach their goals. When it comes to investing, many people experience the same kind of challenges that athletes face in achieving a high level of performance. That’s why it is fitting that they draw upon the lessons that athletes, through their words, can teach them.

“When you’re riding, only the race in which you’re riding is important.” – Billy Shoemaker

When investors focus their attention on the top-performing mutual funds, or the returns their neighbors or colleagues are getting in their funds, they tend to lose sight of the most important benchmark – their own investment objectives. By focusing on other peoples’ investment performance, you are more likely to make investment decisions that have less to do with their needs and priorities, and more about (chasing) the market or trying to pick winners. Investment decisions should be based on your investment and risk profile, and what you need to do to reach your objectives. Everything else is irrelevant.

“Make sure your worst enemy doesn’t live between your own two ears.” – Laird Hamilton

In its 21^st annual report on “Quantitative Analysis of Investor Behavior,” Dalbar, Inc. found that the average mutual fund investor, through his own behavioral missteps as dictated by human nature, underperformed the Standard & Poor’s index by 4.66% over a 20-year period.

Whether it is through chasing returns, succumbing to the euphoria of market highs, or fleeing with the herd at market bottoms, too many investors allow their behavioral tendencies and emotions to guide their investment decisions. This almost always guarantees their underperformance. It is for that reason that developing the right long-term investment strategy is of the utmost importance. The right strategy is the one in which you, even under the direst circumstances, will still have the confidence to follow.

“If you fail to prepare, you’re prepared to fail.” – Mark Spitz

According to the 2018 Retirement Confidence Survey conducted by the Employee Benefit Research Institute (EBRI), only 58% of American workers are confident they will have enough money to retire comfortably. The study found that people who had a retirement plan in place were more likely to feel confident about their future financial security. Most people don’t plan to fail. They simply fail to plan adequately. Planning for a secure retirement starts with setting realistic goals and committing to a long-term strategy.

“Without self-discipline, success is impossible, period.” – Lou Holtz

The inclination to exercise discipline and stay the course in the face of extreme events doesn’t come easily for most people; but those who can are better able to insulate themselves from the emotion-inducing hyperbole of the media and the panicking herd. Disciplined investors accept the fact that there is risk in the markets and the chance of experiencing negative returns in their portfolio at one time or another is a very real likelihood.

They also know that the longer they hold their portfolio, the more likely they are to experience extended periods of positive returns. Human nature being what it is, people often need reinforcement to maintain and exercise discipline. That reinforcement can come from a strong sense of purpose for what they want to accomplish, and it can come from having a plan in place to which makes it easier to follow the right path.

“An athlete cannot run with money in his pockets. He must run with hope in his heart and dreams in his head.” – Emil Zatopek

When the pursuit of wealth simply turns into a pursuit of more money, there is no real destination, and happiness can only be fleeting because any sense of satisfaction will always be temporary. The failure to appreciate what you have today only increases the risk of more with absolutely no guarantee of increased happiness. For the people who consider themselves wealthy today, more money and spending doesn’t necessarily improve their happiness.

Without a clear vision of their future, people will more likely focus on the here and now, which favors consumption over savings. Absent a clear, personal ambition based on what true wealth means to them, people are more likely to take their cues from the actions of those around them rather than their own vision of a good life. People with clarity of purpose and a clear vision of their future tend to view wealth as the culmination of their accomplishments, and the money they’ve accumulated along the way is only a part of the means to an end.