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America’s Favorite Pastime and Your Investment Portfolio

How Baseball Can Help You Know How to Approach Your Investment Portfolio

 

Warren Buffet, the “Oracle of Omaha,” has a reputation for being a great admirer of America’s pastime – baseball. So when he gives out investment advice, he likes to use a few baseball analogies. As baseball season is in full “swing,” take a look at some of these baseball parallels as they serve as a reminder of how to approach your investment portfolio.

“What’s nice about investing is that you don’t have to swing at pitches,” says Buffet. This is a good rule to follow, as many pitches offered by those who are selling products might often come with too much risk attached, and little to no insight into those risks. Buffet advises that investors only swing at the pitches that are right for them.

Buffet also says that in baseball, when one wants to score runs, they have to watch the playing field, not the scoreboard. He is a consummate student of what’s going on around him and only jumps at investments that have a long history of stable earnings. Investors who are planning their strategy would be wise to do the same – think long term and for the future, not of long shots meant to achieve short-term gains.

The Financial Post also jumped on the baseball analogy bandwagon, offering up the idea that a really strong baseball team will be proficient in pitching and batting, and they’ll have speed, excellent defense and a winning culture in the clubhouse. However, rarely are all of these components firing at the same time.

The same is true of a strong investment portfolio – you’ll have your money spread across many different products, from stocks to bonds and other investments. They all have different levels of risk, but while one is performing poorly, others may be bolstering the bottom line.

The New York Yankees have been notorious for paying big money for players who are no longer worth the large contract? The same could be said of investments people make on products that were once starlets, but have their good days behind them. The best scenario is to acquire them while they are on the rise but still at a low price.

Smart baseball managers won’t hold on to an under-performing player just because they overpaid for him. Similarly, smart investors won’t hold on to an investment just because they overpaid for it. Eat the mistake, learn from it and move on so your investment portfolio has a chance to grow.

Playing baseball at a high altitude is different from playing ball at sea level. The air is thin, which means batters can really let it fly. That’s why Denver’s team looks for batters who can consistently get the ball in the air. They also look for pitchers who can keep the ball low so as not to allow their competition to hit fly balls. They plan for their environment, which is what investors should do.

Every environment is different, which is why every investment portfolio has to account for these differences. When you talk to your investment advisor, they will look at your individual goals, your financial situation, and help you make the right choices to help you reach your goals.

We’re baseball fans at Family Investment Center, but we’re also huge advocates for smart investing. Let us assist you in building a strong investment portfolio for you. Contact us today and let’s talk about how we can improve your situation.

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