Growing up I was a baseball fan for as long as I can remember. The Reds and the Mets were my early favorites but once my parents set down roots in the midwest I became the Cardinals fan I remain today.
Despite team favorites, there was one baseball player that all fans liked and his name was Tony Gwynn. Tony Gwynn was one of the best pure hitters of all-time. He won the batting title 8 times and a .338 lifetime batting average (for those non-baseball fans, it was the highest career average for any player who started after WWII).
And when Tony Gwynn was eligible for the Baseball Hall of Fame – he got in on the first ballot (not that there was any question he would get in on the first try). This past weekend, Tony Gwynn passed away at the age of 54 from salivary gland cancer and the baseball world is mourning.
So what does a baseball legend have to do with successful investing?
LESSON #1: PROLIFIC AND CONSISTENT SMALL HITS
For Tony Gwynn, it was about getting base hits. He didn’t try to hit a home run – he would just beat you with singles and virtually never strike out. Sure, the home run hitters get all the glory, but Tony didn’t care about the glory, he beat you with the singles. And it was those thousands of nice and easy base hits that added up to a hall of fame career.
Investing Takeaway: When it comes to investing, what makes a long term winning track record is not the occasional 10 bagger that you are lucky to find yourself owning. Rather, it is the small but consistent wins that compound over time…the dividends collected, option premium earned, the costs saved, and the consistent profits that can be earned from trading a system that provides positive mathematical expectancy.
Show me an investor who has blown up his portfolio and I can guarantee you that it was because he or she was swinging for the fences…always trying to hit the ball over the fence and paying little attention to managing risks or capital control. As in baseball, small consistent wins can keep you in the investment game for a lifetime.
LESSON #2: LONGEVITY
Tony played for twenty years. By knowing what he was good at and focusing on that one thing (base hits), he played professional baseball for two decades. He knew by just getting hits, it will help his team win and he wouldn’t be the “flavor of the month”. The final result was 3,141 hits over twenty years.
Investing Takeaway: Successful investors find what they are good at and once they do, they stick with it. A successful investment approach is one that meshes with an investor’s personality and goals. For some investors, it might be the intensity of day trading and the idea of going home flat every night that works. For others, it might be growing a portfolio of dividend achievers and letting compounding do its magic over time. Regardless of where you fit within the spectrum, the key is to find an approach that fits and to stay with it.
Ideally, I want an approach that can capture most of the upside while protecting me from most of the downside.
For me, systematic, rules-based investing is the approach that I am most comfortable with. It keeps my emotions in check, it provides discipline, it manages downside risk, and it automatically adapts to the ever changing markets. I don’t have to worry about guessing what the markets are going to do next. I know that my models will adapt and that’s all I need to know.
Investors who are constantly chasing systems and investment fads typically make no progress and are often near dead broke. There is no Holy Grail and no Get Rich Quick Scheme…give it up before its too late if you find yourself getting caught up in this.
LESSON #3: LOYALTY
In a era where professional athletes hop from team to team for a bigger paycheck, Tony Gwynn was loyal. He played his entire career for ONE team, the San Diego Padres. The relationship he had with San Diego fans led to the team literally building a statue of Tony at the ballpark!
Investing Takeaway: Once you have found the approach that works for you, follow it day in and day out. Yes, I know that can be boring. Within all us is the desire for excitement and for change….but when it comes to investing, the more times we can repeat a process that has positive mathematical expectancy, the more likely we will be successful. Don’t believe me? Think about a casino. They know and they have built their lavish buildings on players staying at the table, hand after hand, roll of the dice after another. The problem here though is they have the edge and you don’t. In investing, it is easy enough to find an approach (Portfolio Cafe, cough, cough) that gives YOU the edge. You simply have to be willing to stick to the discipline of following a system. Find what works and become loyal to the process.
They broke the mold when they made Tony Gwynn, both the baseball player and the man. And there are many lessons to be learned by looking back and reflecting on his life.