The men’s and women’s March Madness championship games just finished up and the Masters are about to start. We’ve talked in the past about how choosing your brackets and winning teams is similar to choosing your investment strategy, but what about sports in general? Does preparing, competing, and planning for the year ahead have any resemblance to managing your money? Turns out it does, and this is how:
Preparing to win
It doesn’t matter what the sport is, whether you’re competing for the Olympics or for the Peewee hockey tournament, day in and day out the athletes go to practice. They run drills, expand upon their skills, and scrimmage so they’re ready and confident for the real thing. They come up with many different plays because they know they can’t predict what will happen during the game, but they’ll have a strategy for how to react when something unexpected does happen.
Creating your financial plan and investment strategy has a lot in common with this. As advisors, it doesn’t matter if we’re planning for someone just starting their first job, or someone with $10 million dollars in their portfolio, we track the economy, holdings in our models, and relative news that could affect the direction things go in to determine our next action steps. If you’ve met with us, or another advisor, you know we talk about the unexpected. What will we do if the market takes a turn, where will we pull income from if you need the money, how long we expect this market cycle to last, and how to weather the storm. While we can’t predict the market, we are well prepared for different scenarios and how to respond.
Playing the tournament
Game time! It’s time to put all that practice and preparation to the test. You’ve been anticipating this day since you first started honing in on your practice, this is the reason you started after all – to compete and to win - not to spend hundreds of hours of practice to sit on the bench.
Wealth planning and investing are similar. We do the planning, so that we have a strategy to put into practice. We don’t simply let the plan sit unexecuted for years and years. We plan for your personal goals, your retirement, and any other financial event that you are anticipating. We understand your risk tolerance and come up with a portfolio directed towards the greatest return for the least amount of risk, within your comfort zone. Then we put it all into practice! Imagine completing a financial plan full of investment strategies, but then sitting in cash for 3 more years. Doesn’t make much sense, right? The plan is our roadmap to get you to where you need to go, and the investing is part of the way to get you there.
The championship game is played, and the season is over! Whether you win or lose, it’s time to get up and get ready for next year. That might mean celebrating that big win and keeping up with your practice routine that got you this far, analyzing where improvements could be made and focusing on the micro-level to get even better, or learning from a loss and making big adjustments for the comeback year. Wherever you are at the last game of a season isn’t the end, it just means getting back to work and doing what you love to come out victorious.
When it comes to your money, we’re always looking ahead. Typically, you’re reviewing with your advisor once a year. Looking at things like savings rates, progress on the goals we set, and the market’s past performance. Then comes the analysis- do we need to increase the savings rate? Did you get a new job with significantly more income? Let’s plan for what to do with that extra cash flow. How did the economy do last year and what’s the outlook ahead? Whether we had a year of double digit returns or we saw a decline in growth, we’re always analyzing, adjusting, and looking forward for years to come.
Sports and financial planning have a lot in common. The key to achieving your goals is practicing, competing, adjusting, and continuously looking ahead! Next time you’re sitting down with your advisor, or at your kid’s sporting event, just remember it’s all about setting goals and keeping your eye on the prize.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.