Give investing a try
Although you may find it hard to believe, there are many things that make for both a great tactical rugby game plan, and a great investment strategy.
By independent financial planner Tim Mackay.
This month will see a boisterous cacophony of Welsh, Irish, Scottish and English fans clad in red descend upon our shores. In anticipation, there are lessons to take from this British and Irish Lions tour, that apply equally to rugby and investing.
Focus on the fundamentals
Getting the basics right in rugby is crucial – a competitive scrum; a dependable lineout; intelligent kicking in general play; no silly penalties in your own half; a well organised attack and a strong defence that completes tackles, are all essential.
How does this relate to investing? Outside influences can sometimes divert your attention from the basics of good investing. Don’t be distracted by headlines, focus on investing fundamentals such as cashflow management, asset allocation, diversification and investment selection.
Will the Lions and Wallaby team formation and strategy be defensive or attacking? Will Tahs mix with Reds? Will Welsh, Irish or Scottish mix with English? What combination will be most effective in the playing conditions and against the opposition?
Investing is no different. First determine your defensive and growth mix. Like the two Kiwi coaches Robbie Deans and Warren Gatland, research the best alternatives and analyse the options. Evaluate market and economic conditions, examine opportunities, and determine your final selections.
Just as it may be difficult for Scottish, Welsh and Irish fans to support a team with English players, with the right advice from your financial advisor you shouldn’t be afraid to include investments that you’ve not considered before if it better balances your portfolio.
The team, not the superstar
In rugby, more than most sports, individuals matter less than the whole team. The fading superstars or the troublesome but prodigious talents may seek selection but coaches know that it’s the whole organisation that must perform to succeed.
When investing, don’t seek to shoot the lights out with any one investment. That’s gambling, not investing. Similar to playing percentage rugby, creating a portfolio where individual investments form part of a well-constructed portfolio leads to better long-term results. Take the easy three points on offer and only go for the seven points when it’s a calculated and managed risk.
Regular health checks
Once the two teams are selected it is unlikely they will be the same through the entire tour. Loss of form, injuries, and player misbehaviour wreaks havoc on team continuity and performance. To ensure success, coaches review and make changes where necessary.
Similarly, review the health of your investments. Don’t chop and change too often, but ensure ‘weak’ investments aren’t left unchecked for any extended period which can undermine portfolio performance.
In the past two Lions tours, the team to lose the first test (Australia in 1989, Lions in 2001) went on to win the series. Likewise, when you hit investing setbacks, reconsider your selections and tactics.
As a long suffering Tahs supporter it pains me to say it but the best games to watch are the ones in which the players simply love what they’re doing – the passion is infectious.
You couldn’t help but watch in enjoyment as Wales defended its 6 Nations title to take the Grand Slam; as the All Blacks have dominated the past 10 successive Bledisloe Cups; or as the Crusaders took out a record seven Super Rugby titles.
So too when it comes to investing – enjoy yourself. With a structured approach and a sense of commitment you can develop a passion for finance. Ask lots of questions, strive to continually learn and heed the words of Warren Buffett: “Without passion, you don’t have energy. Without energy, you have nothing.”
A good coach is key
In 2003 Clive Woodward taught England that southern hemisphere teams weren’t invincible and, with the right preparation, they could be beaten. His leadership brought out the best in players who respected his knowledge and technical and people skills. Yet a mere two years later Woodward couldn’t replicate his success with the Lions, losing to New Zealand 3-0.
Likewise, while Robbie Deans proved his success with five titles with the Crusaders he hasn’t recreated this success with the Wallabies (I’m very happy to stand corrected after this Lions tour!). For coaches and teams to succeed they must gel and complement each other. Talent may win games, but coach and team chemistry wins tournaments.
Take a similar approach when investing. Hire an experienced and skilled advisor whom you trust and who complements your style and approach.
Sit back and soak up history
History favours the Lions, who have won 15 of the 20 games played since 1899. More recently in 2001 the Wallabies won the Tom Richards trophy 2-1.
If you’re wondering who Tom Richards was, he was the only person to have played for both the Wallabies and the Lions, in the early 1900s. He also played for Transvaal in the Currie Cup, Toulouse in France and won an Olympic gold medal in rugby for Australia. Off the field he was a stretcherbearer who landed on the first day at Gallipoli and was later awarded the Military Cross on the Western Front.
With my beloved English wife, our household will be divided right down the middle and you too may have family or friends who, for some strange reason, support the Lions. The last impartial words go to former Wallaby, TV commentator and accountant, Chris Handy – “Go you good thing. Crown yourself in Wallaby glory”.
Tim Mackay BEc (Hons) MBA CA CFP SSA
I am an independent financial planner, SMSF expert and company director. I thrive on providing independent, expert financial advice to my wonderful clients. With international investment banking experience at Deutsche Bank and UBS in London and New York, I was recognised as SMSF Advisor of the Year by Independent Financial Advisor Magazine.