You May Be More Like Theo Epstein Than You Think
Sunday night the Dodgers pulled off a Hollywood-esque win in the bottom of the 9th over the Cubs. For a fan of the game, it was perfection - Justin Turner hit a 3-run homer off John Lackey to break the 1-1 tie, win the game for LA, and put the Dodgers ahead in the series 2-0. Depending on who you root for, it was as exciting, or devastating, as it gets.
I usually turn the game off when it’s over because I can’t stand watching the post-game commentary, but I watched this time. The MLB analysts ridiculed Joe Maddon (Cubs’ manager) for his decision to bring in Lackey rather than the Cubs’ closer, Wade Davis. They spoke in “should have, would have, could have’s” the entire post-game. It’s amazing how easily people can fix the past. Remember, hind sight is always 20/20.
It got me thinking about how closely related professional sports and investing actually are.
Let’s use professional baseball as an example. The players on the field are like the stocks or funds in your portfolio. For the most part, your starting lineup stays consistent, but changes are made as the season progresses when the manager sees fit. Likewise, your portfolio should not change dramatically every day, but over time it should evolve so you’re best positioned to achieve your goals.
The head coach, Maddon in this case, operates a lot like your investment manager or financial advisor. It’s Joe’s job to put the right players in the lineup every night and make the appropriate substitutions when situations present themselves, just as it is your advisor’s job to select your investment options to best achieve your goals over time.
And YOU are Theo Epstein, the Cubs’ GM. It’s your job as GM to select the right manager and staff to position your team, or portfolio, for success. Do you think Theo listens to the MLB analysts’ opinions when making important strategic organizational decisions? Absolutely not. And you shouldn’t listen to the talking heads on TV that tell you what to invest in or when to pull out of the market because the sky is falling. He has a team of trusted advisors, and you should too.
Joe Maddon had no idea John Lackey was going to give up a home run and lose the game for the Cubs. If he did, there’s no way he would have put him in. Similarly, no investment manager can predict the future. If they knew with absolute certainty which funds or stocks were going to skyrocket, of course they would add them to your portfolio. But we, as financial advisors, are wrong all the time, and so was Joe Maddon. So, then, why opt for Lackey over Davis?
Because Maddon stuck to his plan (please watch his response here). Wade Davis is his closer, and John Lackey is a veteran big leaguer that can handle high pressure situations. His plan all season, which led them to a 92-70 overall record and a 1st place finish in the NL Central, was to have Wade Davis save ballgames when the Cubs were ahead. His plan didn’t work out Sunday night, and that’s ok. Not every investment you make will gain in value. Some will flat out tank. The market will experience downturns. That’s normal.
With a disciplined process that has a proven track record of success, however, you’ll win more than you lose (92-70 is a pretty good record in baseball). There will be naysayers along the way… like the MLB analysts and armchair quarterbacks of the world. They are paid to stir the pot. Keep them at arm’s length.
The sports commentators, just like the talking heads on Squak Box, Mad Money, or any other finance show, are paid to grow ratings. Put differently, they are paid to sell drama. Drama sells. Drama boosts ratings. Don’t believe me? Ever see or hear of the Kardashians? What about The Real Housewives of (insert random city here)? I, for one, don’t care about TV analysts’ predictions, neither does Theo Epstein, and neither should you.
Don’t let the drama scare you. Don’t listen to the talking heads on TV. Don’t try and time the market. Trust your advisor’s process, or find an advisor whose process you believe in, and stick to it, regardless of the noise around you. It won’t always work out. Sometimes you’ll lose. The market will crash, and it will feel like you just lost in the bottom of the 9th on a walk-off bomb. It is temporary. Stay the course.
Trust that you, as the GM of your financial future, have the right people managing it, and if you don’t, do what every good GM does. Make a change.