Money Matters: Want to be a better investor? Play more golf

prev
next

By Ashley Wilson

The Daily Record Newswire

Golf can be an emotionally and mentally draining sport. Most golfers have a love-hate relationship with the game. Bitter memories of lost matches, missed putts and embarrassing mistakes can linger for years. At the same time, a peaceful moment standing on a tee box on a warm summer evening can be blissful.

Golf also can provide powerful life lessons about emotional intelligence. As an avid competitive golfer and a financial adviser, I have begun to notice how certain lessons from golf can apply to money management.

Maintain composure

Last month I played in a tournament where a competitor was playing beautifully. He was stringing pars together and was on track to shoot in the mid-70s -- a very good score for someone with an 8-handicap.

On the par-5 16th hole, the round turned. He hit his approach shot short of the green, behind a bunker and a tree; then he hit into the bunker and proceeded to use his wedge to prune a nearby tree. He cursed his stupidity as he walked into the bunker and then hit a mediocre shot onto the green. He needed three puts to finish with a triple bogey. His anger did not subside and he ended up carding an 80.

For most golfers, a tee shot into a hazard or a fat chip shot often will lead to more mistakes because few of us are able to take a deep breath, accept the result, refocus and move on. Instead, the typical golfer will slam their club into their bag, utter an expletive and angrily stomp up to the ball. Focus is loss and more risk is taken in an attempt to make up for the lost strokes. A bogey turns into a double or a triple bogey and the angry golfer claims the day is ruined.

Most golfers would play much better if they could maintain their composure through the spectrum of emotions, from anger to elation. Investors would make better decisions if they could do the same.

Composure is about keeping emotions under control. It's staying calm, despite setbacks. Most investors feel comfortable owning stocks only when they see their portfolio increase. When stock values decline, investors lose their composure and make poor decisions -- buying high and selling low. The result is consistently poor performance.

The next time a stock takes a dip, try taking a deep breath to remain calm. Then look to move on and forget about the result.

Accept losses

The best golfers in the world will lose more tournaments than they win. Rory McIlroy had an embarrassing and unforgettable collapse at the Masters this year, but he bounced back to pummel the competition at the U.S. Open in June.

Similarly, most investors have experienced significant losses in their stock portfolios over the last several years. Losing is painful and has driven many investors into the perceived safety of cash and bonds and out of stocks, perhaps forever.

Investors who turn from stocks because of losses they've experienced are potentially setting themselves up for a riskier loss scenario - the loss of purchasing power. Inflation is a silent killer that will eat away at hard-earned assets. Stocks are one of the few investment vehicles that have historically kept pace with inflation over many decades.

Good golfers and smart investors have been burned, and they'll likely be burned again. The reason they become successful is because they accept what happens, move on, and stay on the path to victory.

After a loss, try working to improve your greatest weakness. You'll become more resilient and boost your game.

Focus on the target

I learned an incredible, game-altering principle from Bob Rotella, a famous sports psychologist. The idea is simple, but consistent execution is difficult and requires discipline and practice.

Virtually every great golfer focuses on one thing during every shot -- the target. On a tee shot, it might be a lone tall tree in the distance. On a breaking putt, it might be a spike mark on the green.

Focusing on the target will keep the mind from drifting to mechanical swing thoughts or negative self-talk such as: "Don't hit it in the water like last time." According to Rotella, focusing on a target allows the brain and body to work together in harmony.

Focus in golf is akin to setting financial goals and keeping them in mind -- always. By holding those goals closely, an investor will be less likely to react to a weak earnings or jobs report that sends stocks tumbling.

We are constantly bombarded with information and news about the world around us, and most of it negative. Without long-term goals to provide a framework for decision-making, an investor is likely to get caught up in the daily noise and make poor decisions.

Golfers and investors who manage emotions effectively by practicing composure, acceptance and focus may be well on the way to success.

Remember this famous quote from Arnold Palmer that applies to golf, life, work, family and investing: "I've always made a total effort, even when the odds seemed entirely against me. I never quit trying; I never felt that I didn't have a chance to win."

----------

Ashley Wilson is a financial adviser with the Wilson Financial Group of Stifel, Nicolaus & Co. Inc. in Portland. Contact her at 503-499-6260 or wilsonam@stifel.com. Note that an investment in stocks will fluctuate and may be worth more or less than the principal invested when sold.

Published: Thu, Aug 4, 2011