Imperfect Success

Little nuggets of wisdom can be found all around us if we keep our eyes and ears open to the possibility.

We got an unlikely piece of investing advice from one of the greatest tennis players of all time this week.

Yes, the great Roger Federer. A major champion 20 times over.

Yes, the great Roger Federer.

Earlier this week, Federer delivered the commencement address to the graduates of Dartmouth College in New Hampshire.

He talked about his success and all the matches he had won. By his calculations, he was victorious in about 80% of his 1500 professional matches. He wasn’t boasting. He was setting up the punch line to the story.

Federer then asked the graduates to guess what percentage of actual points he had won.

Federer then asked the graduates to guess what percentage of actual points he had won.

“Only 54%,” he said in answering his own question.

Yes, one of the greatest players to ever pick up a racket won little more than half the points he played in his illustrious career.

Federer said that taught him a powerful lesson, not to dwell on any single point. Yes, treat the point at hand with everything you’ve got. But, win or lose, move on to the next point. Then, the next point after that.

Federer said that taught him a powerful lesson, not to dwell on any single point.

He used that insight as a metaphor for life, but it also rings true with investing.

As I’ve mentioned before, the billionaire “bond king” Jeffrey Gundlach estimated he’s been right on his market calls about 70% of the time in his 40-year career. That means 30% of his calls missed the mark. And, yet he’s amassed an amazingly successful career. Gundlach even echoed Federer’s point, acknowledging a slightly better than 50% hit rate is enough to see success as an investor.

This understanding of imperfection is beneficial because it can help frame up your experience. Investments are bets on the future after all and it’s silly to think anyone could precisely see the future. So why should we expect anyone to make perfect calls on investments.

This understanding of imperfection is beneficial because it can help frame up your experience.

As you’re evaluating your own investing, keep these things in mind:

Don’t dwell on your past investment mistakes. You may put money to work at the wrong time, in the wrong investments or in less-than-optimal accounts. You may forget to invest and miss significant returns. Keep your head up.

Don’t dwell on your past investment successes. You may develop an overconfidence from making a good call that yielded significant gains. Remain humble and disciplined.

Don’t dwell on your past investment successes.

Focus on making good decisions with your money today. Create a strategy that matches your current goals. Then fund it. Today, tomorrow, next month, next year. Adjust strategy as you adjust your goals.

The real key to financial mistakes is making ones that prove fatal. Putting too much money into an investment that goes bust. Locking up too much money in investments that don’t produce income or have steep penalties on withdrawals. Driving your investments either too fast for your goals or possibly even, too slow. In short, getting too greedy or too fearful.

Roger Federer, to me, was the most balanced player I’ve ever watched. He was the maestro. He looked like he was never stressed, barely sweat and effortlessly glided his way to greatness. Of course, that’s not true. Even he acknowledged the myth. He knows he worked hard to make it look easy.

Roger Federer, to me, was the most balanced player I’ve ever watched.

You can apply the same approach with your money. You can work hard, sacrifice and save. You can create a strategy that helps reduce your stress so your future return looks effortless from the outside. But, you’ll know the real truth: it was the product of discipline and consistency.

If you need someone to help collaborate on that strategy, reach out. We’d be glad to add value when you’re ready to implement your vision.

This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.

This material is provided as a courtesy and for educational purposes only.

All views/opinions expressed in this newsletter are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC.