My father always taught me that the lessons you learn in sports apply in life. I'm now a college soccer player, which means I've had plenty of opportunities to learn from mistakes. Here are five lessons I've learned from more than 15 years of playing soccer and how they apply to investing.
1. Focus on the fundamentals.
You can't master a sport, or anything for that matter, if you skip the fundamentals. Buying shares in companies means buying pieces of businesses. Too many investors focus on ratios and estimates without knowing one simple fact: How does the company make money? If you can't answer that one fundamental question, you shouldn't buy the stock. My goal as an investor is to learn everything I can about the qualitative aspects of businesses before I see the numbers (but I've got a way to go before my investment experience matches my soccer experience).
2. Ignore the noise.
In any sport, you're going to deal with loud fans on both sides. The only way to play in this environment is to tune it out and focus on doing the simple things right. Investing is no different. Every new development produces a flurry of articles and opinions. You can't predict the overall economy, but you can ask yourself one question: Does the new development change my long-term investment thesis? If it doesn't, feel free to do nothing or buy more.
3. Numbers don't mean everything.
On paper, the better team should win every time, but we know that's not the case. Upsets happen because good teams have a bad day or underdogs bring something extraordinary to the table. And many times that extraordinary element is nothing but honest hard work. The point here is that you can't rest your investment decisions on numbers alone. A great company on paper will fail in the long run if its qualitative characteristics aren't in order. And sometimes a company's intangibles, such as culture or value proposition, can turn a laggard into a success. Always consider the qualitative aspects before making an investment decision (see point No. 1).
4. Mistakes happen.
Every athlete knows the feeling of a bad practice, but one bad practice is never a reason to quit. Sometimes companies have bad quarters. If you pick the right company and its stock price falls on bad news, don't sell unless your long-term investment thesis is affected. If it isn't, consider buying more. You also have to stay positive. If you take anything from this article, it's that every long-term pursuit is about staying positive. Success turns on that dime. Not every stock you pick is going to be a winner. But a positive outlook combined with active learning and mental fortitude can help you succeed in investing just as they help in sports.
5. It takes time.
Rome wasn't built in a day, and neither are high-level soccer skills. Why should you expect anything different from your investing portfolio? If you're investing for five-plus years, the market's daily fluctuations shouldn't concern you. And in case you're worried about a stock market crash like we had in 2008-2009, here's a personal anecdote: I saved all of my birthday money up until age 17 and put it all in a UTMA account in 2008, just before the crash. I watched my savings get slaughtered, but a funny thing happened. When I reached the age of majority, I was prevented from trading until I transferred the account. I decided to wait, because the barrier removed the temptation to trade and over time, my holdings recovered. I'm convinced that I would have panic-sold had the barrier not been in place. But I learned a valuable lesson that I should have realized from soccer: It takes time.
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