By Gary Brooks, CFP®
Outside of family, the two things that have defined my life more than anything else are baseball and personal finances.
Long before I became a CERTIFIED FINANCIAL PLANNER™ and the president of an independent wealth advisory practice, I was a pitcher in college and later a Major League Baseball reporter for several years. Crossing over the two very distinct careers, I have been an official scorer for the past nine years for the Triple-A Tacoma Rainiers – the top minor league affiliate of the Seattle Mariners.
At the intersection of these two worlds are many similarities that just might help one define the other. Here are several thoughts about how baseball is like investing or making financial decisions.
The Summary Dozen – 12 points for those who prefer Cliff’s Notes
- Probability of outcomes is important – whether it’s sacrifice bunts and stolen bases or investment returns and funding financial goals.
- It takes longer periods of time (at bats or market cycles) to separate skill from luck.
- A quality process is more important than immediate or short-term outcomes.
- Being dazzled by past performance clouds present decisions and doesn’t guarantee future outcomes.
- Use specialists where they add the most value.
- Paying attention only to the moving ball is equivalent to making investment decisions based only on recent performance. It misses many important elements that define why things are happening on the field and markets.
- Baseball scouts are to baseball fans as investment managers are to average investors. These insiders make decisions informed by way more advanced data and resources than most people. That still doesn’t make them foolproof.
- Although sometimes difficult, it’s beneficial to be concerned only about things that you can control.
- The best teams and investment plans have a documented philosophy or approach to evaluating present conditions while building for the future.
- Facts and data are only facts and data if they support the views of those they are presented to. Otherwise, they are biased opinions. The same information can be interpreted very differently by two people.
- Most mutual fund managers are the equivalent of baseball card commons.
- Fantasy baseball drafts are an example of growth vs. value investing. It’s easy to overspend on growth and overlook a good value.
Now on with the show …
Investing and baseball (Part 1) – What do they have in common?
Investing and baseball (Part 2) – Tony Gwynn and Understanding Probability
Investing and baseball (Part 3) – Statistical Analysis
Investing and baseball (Part 4) – Team building and investment portfolio
Investing and baseball (Part 5) – An insider’s perspective on the game
Investing and baseball (Part 6) – Ongoing re-evaluation and adaptation
Investing and baseball (Part 7) – Keeping scores can be a matter of perspective
Investing and baseball (Part 8) – The rarity of most valuable “players”
Investing and baseball (Part 9) – Fantasy baseball (growth vs value)
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