Baseball is starting this season with a host of new rules and regulations, with all the hopes and dreams of the fans of every team, with all of the uncertain outcomes no matter how certain they seem at the beginning of the season. Baseball and investing…full of faith, hope, and discipline!
At the beginning of the year, we hope our team comes together to win a majority of the games. We need our players to stay healthy and unhurt over the course of the season. We are looking for homeruns, knowing that we also need to accept the many strikeouts. We hope that the manager uses his players well and makes smart decisions along the way. And we may need a little luck from time to time to help get us into the playoffs.
Baseball and Investing… Investing and Baseball
And so we now think about investing, beginning each year with the hope that the markets will be ‘good’. We approach each year with optimism and a game plan, hoping that something doesn’t come along to derail our intentions. However, then life happens, and we can end up on a roller coaster ride:
- Wars can begin out of thin air
- Global warming can ravage parts of our country and our world, demanding unexpected resources
- Pandemics can happen
…All strikeouts!! And then a homerun happens, usually when we least expect it. And we’re back in the game
With baseball, you can start with a strong team and then things can happen. An injury here, a shock to the financial system there, and then the outcome can seem less certain. What I’ve experienced with baseball is…the manager has planned for contingencies. They have extra players on the team, multiple people can play in multiple positions, they don’t rely on everything going perfectly according to plan to achieve success. They manage the process as they go along, and sometimes that delivers a World Series ring and sometimes that allows us to barely make it past .500 (by us, yes I do mean the San Francisco Giants!)
Investing follows the same trajectory. You can start the year with a healthy economy, and then things change. There’s:
- a mortgage crisis
- a bank collapse
- a new ‘unprecedented’ threat around the corner
Plan (or at least be ready) for Contingencies
Planning for contingencies always has to be part of the financial planning process. Do you need to spend all of your money within the next year? If not, you can probably absorb those short-term shocks to the system more easily than someone who has more immediate financial needs. The markets never work predictably or with certainty, though many articles make it seem like that after the fact. However, the markets do ‘work’ in the long run…even if it’s not a World Series win result every year.
Play ball…and Go Giants!