Take it Seriously; Investing is a Profession, Not a Hobby
Last week we discussed the importance of being professional in one’s investing approach. The major part of being professional is executing a well documented, researched, tested and proven investing plan. Unfortunately however, not only do many not have such a plan, they overestimate the amount of effort they’re applying to their investing. Rather than treating their investing like a profession, it’s relegated to ‘hobby’ status.
This week I’m going to use an analogy to illustrate this concept. It’s one I’ve been using for quite a while at my workshops to prove the point of just how hard and how much time and effort is required to be truly successful in the markets. You’ll understand what I mean in a second, but funnily enough this analogy used to work well until quite recently. It’s now the source of great amusement to my students!
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I’m a keen weekend warrior golfer. I say warrior because you can often find me conquering the shrubs and bushes at a local golf course near you on a Saturday morning. No shrub is too thick, and no forest too impenetrable in my quest to find my ball after a wayward tee shot.
Sure, I like golf, but I’d hardly call it my profession. It will only at best be a hobby for me. I’ve got precious little time to practice my game and therefore most of my practice occurs in actual game-time when I really should be reaping the rewards of my efforts during the week. My lack of time in seeking golfing perfection is of course a big issue, but apart from my near phone number handicap, I would have to say that my biggest handicap is probably my lack of talent. I really don’t have much of it when it comes to yielding a club…
I’d like to say that my excuse for why I’m so lousy at golf is that I wasn’t born with the innate genius of Tiger Woods (you might be getting some idea of the mirth this analogy now causes in my workshops!).
However, one could argue whether Tiger was born with his talent and that’s why he’s so good, or whether it was an acquired ability? We are of course talking about Tiger’s golfing prowess and no other innate ability to score (ok, that’s the first and last joke I’ll make about that!).
How did Tiger get so good? Was he born with it or did he work really hard to acquire his talent? Well, I think his talent has more to do with the fact that he started playing golf as soon as he could walk and hold a club. He had an excellent coach and mentor in his father, he has worked almost religiously on his game seeking out the best professionals to show him where he’s going right and going wrong. Then there’s the practice. Tiger’s a bit of a hero of mine (golfing only) and I’ve seen a few documentaries on him. I’ve seen him practise rain, hail or shine for 8 hours a day. He’ll chip 300 balls out of a bunker, step one metre back, and chip another 300 balls, and so on.
I can only conclude that the secret to Tiger’s success isn’t actually a secret at all: It’s hard bloody work! Time spent practicing, which gives you experience, which gives you confidence, which gives you…you guessed it…talent! Who would have thought it would be so easy (hard!)?
It’s not enough to say that practice makes you perfect however. That’s just something our teachers told us at school to make us feel better about sucking at whatever it was we were doing. It’s more accurate to say that perfect practice makes for perfect application.
You see, there’s a big difference between any old practice and perfect practice. Anyone can grab a set of golf clubs and bash away at 300 balls in a bunker, take a step back and do it again, and again, and again until the cows come home. Believe me, I have done this in the past and it certainly hasn’t made me a Tiger Woods.
Every shot tiger takes, both in practice and in a tournament situation, is recorded and studied. Not just by Tiger, but also those who he’s employed to coach him. Nothing gets taken for granted, and nothing gets missed. By constantly having an action, feedback, and adjustment loop, comes improvement. Continue this and you could improve to the point where you turn your hobby into a profession.
This is really the difference between me and Tiger. I don’t have a golfing coach so I have no idea that I’m doing wrong. Even if I did, because I don’t have an experienced coach I have no idea how to fix it. In my defence however, I really have no intention to quit my day job and start playing golf for a living. I’m never going to have enough drive and discipline to devote the time, resources, and importantly money required to invest in getting myself to that level. If I contribute none of these things then I should not be surprised that my hobby stays just that – something which gives me pleasure from time to time, but which ultimately costs me money.
What’s this got to do with our investing? Well clearly there are plenty of traits which Tiger applies to his golf to achieve his returns that we need to bring to our investing approach. Are we going to treat our investing like a profession and put in the appropriate time and effort and apply this with sufficient passion and discipline? Or are we going to be a ‘weekend warrior investor’ and treat what we do with our money as a hobby? Certainly the two approaches are likely to generate very different results. We’ll investigate further next week.