As I write this the Green Bay Packers have yet to play their arch rivals the Chicago Bears on opening day. The Packers Bears game has proven to be a fierce battle in the NFL’s oldest rivalry. Regardless of records this game is hard hitting and never s sure thing for either team. The Packers recent success makes them the favorite. But all Packer fans, though confident, know anything can happen.
Much like the equity markets NFL games are unpredictable and random. No one can consistently tell you which team will win and by how much.
I personally am looking forward to an exciting NFL season. Culminating in a Packer Super Bowl championship, I HOPE!!
Part of that excitement is the unpredictability. If it always went your way would you continue to watch the games? The reward is watching your team overcome all obstacles to win. The challenge is watching your team lose when they shouldn’t have. Or watching your team go thru a losing season.
The equity markets reward us with great returns over time. This should be done without stock picking, market timing or using past records to invest. The challenges are times when the equity markets have a losing period, perhaps even a losing year.
As the games of the NFL the equity markets are random and unpredictable. But if you can deal with the challenges the results can be very rewarding.
An example is watching any pre-game predictions by the ‘experts’. Even if all the ‘experts’ pick one particular team to win there is no assurance that they will in fact win.
Why? Because the games of the NFL are random and unpredictable. No one can predict if a superstar player will have a good game or a bad game. No one can predict if any superstar player will get hurt and unable to play. No matter how great a player is they can and do still make mistakes. It’s all part of being human.
Another example of luck vs skill. It was the last game of the season against Detroit. Aaron Rodgers was hurt so Matt Flynn played and had a record day. That one game allowed Flynn to sign with another team for $$millions. He never repeated his performance of that day against Detroit. Was it luck or skill?
This is the real reason investors should stop relying on Wall Street experts to predict which stocks are best or how to get into and out of the market at the right time. Or even look at a money manager’s past record of beating the market and assuming they will continue. These are really forms of speculating and gambling with your money.
In the NFL to build a consistent winner you must pick the right personnel both players and coaches. You have to accept that there will be losses and perhaps even losing seasons.
A system and process must be put into place that you believe in as well as all your personnel. Once in place you must have the discipline to keep your eye on the long term. Setbacks are part of the allure of the NFL. This is why we watch.
The same goes for investing in the equity markets we need to believe in the prudent process. Because there is a scientific, evidence based way to invest. Once you have your prudent process you need a coach to keep you disciplined to your process.
Like the NFL, losses happen and losing seasons happen. Without the risk of loss there is little chance for a rewarding experience long term.
As the great Vince Lombardi said “Perfection is unattainable but its pursuit will lead to excellence.”
To succeed you must own equities…globally diversify….rebalance.