Next week, the 2017 Major League Baseball All-Star Game will be held in Marlins Park in Miami. If you’re a baseball fan, you may tune in to admire the skills and grace of the players. And if you’re an investor, you can learn some valuable lessons from the All Stars, including these:
Alertness – Most of us can only dream of having the outstanding reflexes of major league ballplayers. But we can develop a similar trait: alertness. Just as a ballplayer who wants to steal a base needs to be alert to the pitcher’s delivery and the strength of the catcher’s throwing arm, you should be vigilant about investment opportunities and the potential need to make changes to your portfolio.
For instance, you might realize that, over time, your portfolio has become too top-heavy with the same types of investments.
Since these investments are likely to move in the same direction at the same time, you could take a big hit during a market downturn. Consequently, you may want to diversify among a wider range of vehicles, including stocks, bonds, government securities and others.
While this type of diversification, by itself, can’t guarantee a profit or protect against all losses, it can help you reduce the effects of volatility on your portfolio.
Patience – When you watch the best hitters – such as those appearing in the All-Star Game – you will notice that most of them are very patient, willing to wait for several pitches until they get the one they feel they can hit.
As an investor, you, too, need patience. The investment world contains many myths, one of which is that it’s possible to get rich quick by finding “hot” stocks when they’re cheap and selling them after a meteoric rise. But these events are actually pretty rare.
The most successful investors are typically the ones who invest steadily, through good markets and bad ones, and who follow a long-term strategy appropriate for their needs, goals and risk tolerance.
Preparation – During the All-Star Game – or, for that matter, during any game – the ballplayers will know exactly what to do in almost any given situation. To take one example, consider what happens when a runner is on first base and the batter hits a ground ball to the shortstop.
Almost without thinking – because he’s already prepared for this very scenario – the shortstop will flip the ball to the second baseman, who is already standing on the bag, because he too is ready for this play. The second basemen completes the double play by immediately throwing to the first baseman, who is also in the right place, standing on first base.
When you invest, you also need to be prepared for certain situations and how you’ll respond. When your children head off to college, you should know if and how you’ll help them pay for it, maybe because you’ve prepared by saving in a 529 plan or another college-savings vehicle. When the day comes for you to retire, you should know how you’d like to tap into your retirement accounts, such as your 401(k) and IRA.
By being alert, showing patience and preparing for your goals, you can put some of the All-Stars’ skills to work when you invest — and by doing so, you might improve your personal “box score.”