Are good golfers also good investors? A pro in both the game and the market draws out the parallels between golf and investing in the market.
More than perhaps any other sport, golf requires certain character attributes that go beyond mere athletic performance. Without traits like emotion management, positive temperament and an ability to make clearheaded strategic decisions, a golfer might as well be swinging a hockey stick.
These same attributes—among others—also define successful investors. Traits like patience, focus and persistence could just as easily apply to a savvy investor as it could to a professional golfer.
Morgan Stanley Private Wealth Advisor Dick Connolly knows the similarities all too well—he's been excelling at both for decades. Connolly began caddying, golfing, and groundskeeping as a boy and later played high-level tournaments in his teens and in college.
And on the financial side, Connolly has been recognized by Barron’s as one of the nation's top financial advisors, a job he loves with the zeal of a professional athlete. So when we asked Connolly how hitting the links is like investing, he didn't whiff. He narrowed it down to 7 key tips:
As you swing your club, you need to fix your mind on where you want the ball to land. The same is true when you pick a stock or build a portfolio. Both investing and golf require patience—because even the pros only hit an ace every few thousand shots.
“If you hit a bad shot or two and you lose your patience, it's over. The same is true in investing," Connolly said. "Let's assume you like a stock and you buy it. You're not buying it for tomorrow, you're buying for the long term. If you buy and it goes down, you may consider buying more. Unless something's changed at the company, you should stay with the stock. That requires patience."
When thinking about your whole portfolio, the target may be a certain amount of retirement income, or a lump sum for your child’s college tuition. You need to hold that target steadily in your mind's eye.
Traits like patience, focus and persistence could just as easily apply to a savvy investor as it could to a professional golfer.
What separates courage from folly? That depends on your situation in the tournament—or in life. Just as a player in a close game needs to putt more cautiously than a player with a seven-stroke lead, an investor with a short time horizon must choose more conservatively. “Young people can make a mistake in the market and make it back. Somebody in their 70s, if they make a bad mistake, they may not have time to make it back," Connolly said.
While focusing on the target is important, you can't wish the ball across the fairway. You've got to choose the right tools and strategy to get you to the goal.
“Decide how you want to attack the hole: Which side of the fairway you want to be on, which side of the green you want to be on when you're hitting your second shot. It's the same thing with investing. You don't have all your money in just one sector or asset class. You diversify. The angle of attack is: What percentage do you want to have in each category?" Connolly said.
"Playing at a high level in golf, you face pressure situations. You have to be able to handle that. It's like how anyone can do well investing in strong markets—the key is being able to perform in bad markets," Connolly said.
That means no panicking if the market moves against you; stick with the long-term plan unless the situation warrants carefully considered changes.
“The relationship between the player and the caddy is so important. Many caddies help their player win major championships," Connolly said. A caddy who's in tune with his player knows which club to offer before it's needed. In the same way, it's important to maintain a close relationship with a Financial Advisor you trust. It's vital to tell your Financial Advisor if your situation changes, for example. Connolly is always checking in with his clients to let them know about changes in the market and to find out what has changed with them.
No one plans for their ball to land in a sand trap, but when it happens, you don't just give up. You get out your sand wedge and plan how to get your ball onto the green. It's the same when you find yourself in a market hazard, Connolly said.
“You buy a stock. You think you know the company pretty well—then they announce a problem with the product. Then you definitely have to adjust," he said.
“Complete the swing," Connolly said.
In investing, that means keeping tabs on the companies you own. Connolly spends hours every day following through on investments he's made for clients: “Reading research on companies, talking to traders, to people in the business."
In the end, Connolly says, there is one common requirement for succeeding in golf, in investing, and in life: a strong work ethic. That's been his secret to success in a four-decade-plus career and an even longer tenure as a low handicapper.
"You can know exactly how you're going to hit the golf ball, but unless you go out and hit balls every day, it's not going to matter. You can't get to be a good player by taking shortcuts. Same thing in investing: You have to work at it."
Morgan Stanley is a proud Partner of THE PLAYERS® Championship in 2017. In addition, Morgan Stanley is launching the Eagles for Impact challenge. We will donate $5,000 for every eagle made to the Ronald McDonald Family Room at the Wolfson Children’s Hospital.