Summer is right around the corner, which means baseball season is in full swing (see what I did there?). Many parallels can be drawn between baseball and financial planning. In this post I will cover 7 important financial lessons that you can learn from baseball. Enjoy!
“Good Things Happen When You Swing the Bat”
If I had a nickel for every time I heard this, I’d be Mark Cuban. Growing up, my dad was always my coach and would say this to us over and over. In baseball and in investing, you’ll never get ahead unless you’re willing to step up to the plate and take a few cuts. A shocking percentage of millennials are not participating in the stock market, when in fact, they are exactly who should be. Compound interest is the best friend of an investor, especially young investors. Step up to the plate and start investing in your future.
Have a Balanced Lineup
One of the most important things to consider when investing your hard-earned wealth is diversification. This is the idea that if you have your wealth spread out across many different asset classes, your risk is spread out as well. If one asset class -let’s call it emerging markets- has poor performance, the rest of the asset classes you own may pick up the slack. This is the same in baseball. You can’t have a lineup of all speedy on-base guys or all monstrous power hitters. You need to have a balanced lineup to give you an efficient offense. Diversification can help you minimize the volatility in your portfolio.
Prepare for Curveballs
Wouldn’t it be nice if you only had to face fastballs at the plate? Or how about if your roster never had injuries? In life and in financial planning, you have to prepare for curveballs. You need to adjust to adversity and be prepared to “foul a few off”. There will be the occasional bear market and you have to be prepared to handle this volatility. Don’t panic. You may face job uncertainty, benefits changes, or unexpected financial emergencies over time. A sound financial plan will help you to be prepared when these curveballs come your way so you can manage these life transitions smoothly.
Buy Low, Sell High
Often, the first adage an investor learns is to “buy low and sell high.” You want to buy securities at a low point, ride an upward trend and then sell at a high point. This is much easier said than done. This is the same with baseball. During a rebuild, even though you may be fond of a player, it becomes time to trade that player when you can get a few young prospects in return. Or if your team has an abundance of good young players, you may look to trade a few for an established star that can take your team to the next level. No one can accurately predict the perfect time to buy/sell but an experienced advisor can help you to avoid disastrous buying/selling decisions.
Keep Your Eye on the Ball
You cannot succeed at the plate if you do not keep your eye on the ball. It just won’t happen. Everyone who has ever grown up on a little league diamond has “keep your eye on the ball” ingrained into their soul. The same level of focus can be applied to financial planning. If you take your eyes off the big picture, it becomes easy to develop bad habits that can sabotage your long-term financial success. Identify your financial goals and track your progress so that you are always “keeping your eye on the ball”.
A Good Manager Makes All the Difference
Having a good manager can mean the difference between a good team and a great team. Look at the recent success of the Cubs after hiring Joe Maddon or the Indians after hiring Terry Francona. Their experience, expertise, and ability to lead took those franchises to new heights. The same can happen when you decide to hire a strong financial manager (financial advisor). An advisor can help you to make smart financial decisions, keep you accountable, and open your eyes to issues that need to be addressed. You can take your financial situation to the next level with a trusted advisor.
There Will be Slumps
You need to take a long-term view when it comes to your finances. There will be ups and downs in the markets, unexpected financial emergencies, and changes to the tax code that can be tough to deal with. Don’t panic. Have a plan in place and stick to the plan. In baseball, everyone goes through slumps. Your stud lefty may lose three straight starts or your leadoff man may go hitless for a week. It’s going to happen. It’s a 162 game season and you need to be able to keep your eyes on the end goal and weather the storms that come your way. Don’t exacerbate life’s slumps with panicked decisions. Stay the course.
There you have it! There are many lessons that you can learn from baseball that you can carry over to your finances. Did you think of any other items that I didn’t include? Post them in the comments below!