I grew up loving sports – baseball was one of my favorites. I played catcher and always enjoyed going to watch the Astros play. While watching the ‘stros, I dreamed of playing at the Astrodome, having my walk-up song played over the speakers and hitting a walk-off home run as the team carried me off of the field! I never dreamed of hitting a single to just advance a runner – my dreams were always about that home run. Unfortunately, this dream never panned out – the Astros were not interested in picking me up as a free agent.
It is interesting to note that the best single-base hitter in the history of baseball goes to Pete Rose with 3,215 singles in his career. As many sports enthusiast know, Pete Rose also holds the record for the most hits of all time with 4,256. Pete Rose was the best hitter even though 76% of his hits were singles. Pete was never the most powerful hitter (he does not rank in the top 100 when it comes to home runs) but he figured out how to consistently make contact with the ball and get on base.
The same logic Pete Rose used to be one of the best hitters of all-time can also be used to make us better investors – investing should not be about hitting a lot of ‘home runs’ but should be about hitting consistent singles. I am reminded of a quote from Paul Samuelson (famous investor) where he says “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”
Here are five timeless pieces of advice to help you ‘hit more singles’ (and not strike out) with your investment portfolio:
- Curb Your Emotion: Easier said than done – right? Warren Buffett has often said that the stock market is a constant battle between the excesses of fear and greed. It's crazy to see how panic -- or its inverse, exuberance -- can cause intelligent people to make emotional and harmful financial decisions. Remain rational when it comes to your investment portfolio. I am reminded of a quote from Lou Holtz… “Nothing is as good as it seems, and nothing is as bad as it seems. Somewhere in between lies reality.”
- Turn Off The News And Watch More Netflix: I believe watching too much financial news can result in people becoming fearful, stressed, and prone to make poor financial decisions. Said another way… watching financial news offers little benefit and a lot of drawbacks. These news outlets are ultimately just looking to increase their ‘views’ or ‘clicks’.
- Study Your Shopping Habits: When you go to Costco and toothpaste is on sale, what do you do? You typically buy a few extra tubes of toothpaste knowing that you will need them in the future. When stocks drop substantially in price, they may be on sale. Better investing means acquiring the knowledge and discipline to recognize when things may be on sale and buy low so you can potentially sell high.
- Know What You Own: If you can't explain how a company makes money to a reasonably intelligent 6th grader in under 10 seconds, you have no business investing in that company or business. If you can't understand the strategy outlined in a mutual fund prospectus, you have no business investing. Never forget that the most valuable word in your vocabulary is, "No". Do not be afraid to use it. It's better to walk away from a good investment, and still end up financially independent than it is to invest in an Enron type of investment that you do not understand.
- Own Dividend Paying Stocks: The impact of dividends is one of the main reasons everyone should consider dividend paying stocks for the equity portion of their portfolio. A steady dividend stream provides income for investors who need systematic income from their investment portfolio to fund expenses in retirement. For example, Procter & Gamble has paid a dividend every year since 1891. While Procter & Gamble's stock price has not risen every year since 1891, shareholders who owned the stock at least got paid during those down years. They weren't totally dependent on the appreciation of the stock. This is not a solicitation to buy Procter & Gamble’s stock.
Take Away
Becoming a good investor does not happen accidentally. Good investors consistently work at it. They study and they learn. You NEED a holistic wealth plan designed to help you take the emotion out of investing. We do this by developing a Family Index Number which determines the rate of return needed to help meet your retirement goals.
Content Is Nothing Without Context
Are you looking for a weekly financial market commentary that provides context? Sign up to receive our weekly commentary here. We are helping make the complex simple.
Matt Price serves as a Partner and Senior Vice President for The Price Group of Steward Partners. He resides in Houston with his wife, Emily, their two daughters and their family golden retriever. Matt studied at the University of Pennsylvania – Wharton School of Business after receiving his undergraduate degree from the University of Tennessee - Knoxville. Over the past 9 years, Matt has helped families make high quality, common sense decisions regarding their wealth and their legacy. Matt firmly believes that everyone needs a wealth coach!
There is no assurance any investment strategy will be successful. Investing involves risk including the possible loss of capital. Dividends are not guaranteed and will fluctuate.