This past Saturday, I was glued to my TV watching my beloved Michigan Wolverines take on the Ohio State Buckeyes. “The Game” is always one of the most highly anticipated battles of the season, and this year the stakes were especially high with both teams ranked in the top 3 nationally!
Initially, Michigan had little success running the football. 2 yards, followed by 3 yards... “Boring,” one friend said. “We need to be more creative if we want to win.”
At halftime, Michigan trailed by 3 points, with 10 rushing yards on 11 carries. For you stats fans, at this point Ohio State’s win probability was almost 70%.
Still, Michigan stuck with its "boring" game plan, which started to pay dividends. The Wolverines outscored the Buckeyes 28 to 3 in the 2nd half with a now dominant running game. Michigan’s final two touchdowns were on runs of over 70 yards! The final score: Wolverines 45 Buckeyes 23.
Working in financial planning, I started to think about some of the parallels between football and investing. Football fans love when teams go for the quick score — a long pass or trick play. They want success right away. Similarly, investors frequently are tempted to go for the quick score by timing the markets, or trading in and out of what's "hot", such as cryptocurrencies or volatile tech stocks. It's usually a losing strategy.
In both football and investing, the most effective strategy is sticking to a disciplined game plan. We call ours Value Added Indexing®. We construct portfolios based on clients' unique circumstances, taking into account time horizon, need for liquidity, and risk tolerance. We use low cost funds that closely track the markets. We are broadly diversified, holding U.S., International, and Emerging Markets stocks. We don’t make short-term tactical moves, but rebalance when portfolios move away from their target mixes as the markets go up or down. We invest new cash in smaller increments over time, rather than putting it all in the market right away.
It’s like a strong, reliable run game. Sometimes you may get knocked backwards and it's not always the most exciting, but over time it will get you to your goal line.
I know I had doubts about Michigan after the 1st quarter. And while watching the markets and the economy, there are always reasons to have short-term concerns, but sticking with the plan works.
So, as you gather 'round with family and friends this football season, and your favorite team gains 4 yards with a run right up the middle, it's ok to cheer loudly! The only thing that really matters is the final score.
One more thing... to Buckeye fans, my Illini co-workers, or Michigan haters who were offended by my analogy: #sorrynotsorry.
Ben is a Client Service Associate at Rappaport Reiches Capital Management. He is dedicated to providing quality service and support to our clients. Please connect with Ben below. He loves to talk about investing, financial planning and Chicago sports.