If you want to win at investing, you need to limit impulsive behaviour and unforced errors, just like in tennis. In the last week Nick Kyrgios gave a lesson in what NOT to do.
In tennis, and life in general, it is important to avoid unforced errors, often resulting from bizarre impulsive behaviour. Of course, we all make such mistakes. But what Nick Kyrgios did against Daniil Medvedev during Sunday night’s US Open match was slightly more bizarre than “unforced”.
Medvedev hit a return to the left of the court, heading well out of bounds, and not even going to cross the net. All that Kyrgios had to do was let the ball fall to the ground – remember, it wasn’t even on his side of the net - and he would have won the point…
But the ball hadn’t yet hit the ground, so officially the point was still live until it did so. Then Kyrgios crossed to the other side of the net and hit the ball back into play, or so he thought – this would even be strange behaviour for a 10-year-old tennis player. The point went to Medvedev. (See a video of this weird action here if my poor description just gave you a headache!)
Such impulsiveness is a lot more frequent with us “normal” folk but must be absolutely minimised if you want to compete against the best in the world – or even just be at the top of your game in your own particular field.
A dentist can’t impulsively remove one of your teeth!
High achievers need skill, discipline, and even luck – pro’s never underestimate the need for a little luck, though the precise mix varies between professions and sports. For example, a dentist shouldn’t need luck, but a weatherman does. A tennis player will need more discipline than a footballer, and a footballer can benefit more from luck.
You also need to know your limits. Do you really have some special insight?
Knowledge Or Distraction?
A lot of people confuse familiarity with knowledge, and knowledge with understanding. You can become familiar with investing generally by reading the weekend press. But this is not knowledge – it is more likely a distraction.
We believe we have understanding when all we have is knowledge. For example, seeking out the top 10 holdings of any fund before you buy it gives you knowledge. But this tells you nothing about your actual likelihood of success.
You need to figure out all the things you do understand, and those you can control, which are most likely to vastly increase your likelihood of success?
As an investor, you cannot control events, but you can control how you respond to them e.g. not impulsively! You have a process.
As an investor, that process can be very straightforward, such as using Dynamic Fund Ratings. Add discipline on top of your process, and you have the difference between success and failure. A little luck would be icing on the cake, but that is outside your control.
Making Big Hits
One of the greatest baseball hitters of all time, Ted Williams, wrote a book called The Science Of Hitting.
He identified that when people make bad decisions, they disregard what they know, ignore coaches, and become impulsive (Kyrgios anyone?). They stop thinking clearly – process and discipline go out the window.
Ted Williams understood that it is the process by which you make decisions which are key – that process is at the heart of your skill. It moves the odds of success in your favour. A good process, a proven process, increases the odds of much better outcomes.
A key part of that success is understanding the game you are in, knowing when you have an edge, and also knowing when you haven’t got an edge.
When you are in the game of investing, you are pitching yourself against some of the smartest and largest brains (and computers) in the world, investing many billions all around the clock.
You can’t play the big boys at their game. You will fail.
But you can play the game your way, in a way in which they can’t, and where the odds are stacked in your favour. Dynamic & Vintage Ratings could offer you just that edge.
And keep any tendency to impulsiveness in a box.