Investing Is Like Golf

Golf is a simple game.  Using tools specifically designed for the purpose, hit a little ball into a hole in the side of a big ball.  Nothing hard about that.  Except, if you keep score.

Investing is simple too.  Buy low and sell higher.  If the security is not going to increase in value, don’t buy it.  Again it is easy if you don’t keep score.

Keeping score ends up being a serious part of the game and for many that makes it not easy and often not fun.  These simplifying thoughts that may help.

There are no style points in golf or investing.  Not like figure skating or diving.  No judges.  In golf, they never ask how; they ask how many?  Your score is totally independent of how you got it.  A skulled 8-iron that hits a sprinkler head and a tree but ends up in the hole counts the same as a shot that flies in the hole without touching the ground.

Same with investing.  Not all your good ideas turn out well and not all your bad ideas fail.  That makes it harder because you can easily develop a magical formula.  All of those eventually fail.  Both golf and investing work better if you master technique.

Mastering technique in either requires work.  Quite a lot of it actually.  The work does not guarantee a result but it does create a process that tends to work.  In golf and investing if you have enough good tendencies, your outcomes will tend to average out in your favour.

In golf, putting well is a benefit.  Half the permitted shots at par, are putts.  A 300-year drive and a 6-inch putt cost the same. Balance and rhythm matter.  Mental approach is nearly everything.  When I was young, I asked Julius Boros what he thinks about on the course.  He gave me good advice.  “Play one shot at a time.  You can’t change the past and you don’t know what you will need in the future.  Hit the ball.  Wait for it to come down.  Hit it again.”  Process!

With investing, buying sound businesses in good industries works reliably, but not necessarily with a win every day.  Day-to-day investment prices depend on the “Market Pricing” mechanism and it is, to some extent at least, irrational.  Play the tendency not the price.  Buffett claims Mr. Market is bipolar.  Buy from him when he is depressed and sell to him when he is excited.  Understand value and compare to price.

It is not exciting to buy businesses that provide routine returns.  It is hard to go to the club and brag about getting a dividend from WalMart.  A unit in a movie though is wonderful conversation material.  Enjoy the bragging because it may be the only return.

Good investing is boring because the results are more predictable.  Exciting has a cost.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.  In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. 

One Comment on “Investing Is Like Golf

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: