Advice
Baseball and financial management can have more in common than meets the eye. Below, we discuss four key lessons that investors—and everyone else—can learn from America’s favorite pastime.
Diversification of Assets is Critical
Having nine power-hitters who are weak in the outfield can help your team rack up high scores—but may not be enough to win the game. Just as you want your baseball team to include a good mix of a variety of skills and abilities, you should want your investment portfolio to include a diverse mix of stocks and more conservative assets, domestic and international assets, and tax-deferred and tax-advantaged accounts.
And like any good manager, it’s also important to have solid, identifiable expectations of the assets in your portfolio and to know when to cut certain “players” loose. Whether this means selling an asset once it hits a certain price or engaging in more complex strategies like tax loss harvesting, knowing when to call it a game can be the key between winning and losing.
You Need a Plan to Manage Losing Streaks
Few teams are able to consistently stay on top; even the best franchises have gone through tough times. And if the Chicago Cubs’ 107-season World Series drought is any indication, baseball can be full of some long down periods.1
Investors and baseball fans should be prepared for these down periods, no matter when they occur. Look back at historical statistics to reassure yourself that these events happen periodically, and with good planning and a bit of luck, winning seasons can come back. Having a plan to get yourself through these slumps can help investors and sports fans weather even the most discouraging times.
Try to Avoid One-Hit Wonders
Who doesn’t love to see a player blast a 500-foot home run, or watch a penny stock or crypto coin increase by over a thousand times in value nearly overnight? While these types of opportunities are fun to watch and present great feel-good stories, having a portfolio composed of power-hitters can also leave you vulnerable to major fluctuations in value.
All investments have some degree of risk, but it’s important for these risks to be compensated—in other words, investments that have a likelihood of increasing in value that corresponds to their risk, not those that will depend on overcoming the slimmest of odds to create a small group of lottery winners.
Take Advantage of the Seventh-Inning Stretch
The seventh-inning stretch gives fans an opportunity to get a brief change of scenery to focus on the last couple of innings of the game. Investing for years without setting aside time to evaluate your asset allocation, your tax reduction strategies, and your retirement plans can leave you scrambling once it’s time to make decisions about your future. Give yourself a virtual “seventh inning stretch” by stepping back and taking a holistic look at your finances so that you can buckle down with renewed focus.
With a solid game plan and prudent evaluation of risk, you’re ready to get started! For more information on developing an investment strategy, contact Brian Van Duyn by calling (574) 271-4249 or send an email to [email protected].
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Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
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