Winnipeg is my hometown, so the Jets’ playoff run this spring is creating lots of excitement in my household. With all the talk and emotion, not to mention a looming deadline for this column, I couldn’t help but look for investing lessons from their success. I didn’t have to look far.
The way the team is managed relates well to something I have advised before: investors need to have discipline, patience and courage.
The Jets were put together the right way. General manager Kevin Cheveldayoff used the draft well, emphasized youth and made sure he had character guys at the team’s core. Most importantly, he had a plan.
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There are thousands of ways to invest, and most are valid approaches. But for your portfolio to make a good long run, you need to understand how you’re going to do it. You can’t bounce around from one method to another.
A plan is also important because investing is the longest endeavour you’ll ever pursue. It will outlast your mortgage, your beer mug collection and, dare I say, your passion for the Jets, Habs or Canucks.
Unfortunately, we’re investing in a world that has a short attention span. Your newsfeed is all about today, not 20 years from now, so you need a blueprint to bridge that time frame gap.
In addition to a plan, it doesn’t hurt to impose a salary cap on your approach (Cheveldayoff, of course, has no choice). Set a limit on how much you’re going to spend on managing your money and decide where to allocate it: financial planning, portfolio management, trading commissions, attentive service or (hint hint) NHL games with your adviser.
It took a while for the Jets’ plan to play out. I thought last year was going to be their breakout year, but they missed the playoffs. It was deflating.
But management didn’t blow it up. Cheveldayoff kept the same philosophy, coach and core players. He let the young talent mature and added a few pieces along the way.
Investment strategies have a way of frustrating you, too. They may be compelling for fundamental and/or valuation reasons, but there’s no way of knowing when they’re going to click.
Right now, investors who thought resource stocks were oversold or bought pharmaceutical companies for their safety are going through a long dry spell. Value stocks in general have tried investors’ patience. And, as for the pros, fund managers and advisers go through slumps just like athletes.
Of course, strategies can be flat-out wrong. Cheveldayoff could have built a team that looked more like the New York Jets than his Jets. That’s an investing reality for sure, but, from my experience, more mistakes are caused by impatience than flawed thinking.
If you’re going to be disciplined and patient, you also need to be courageous.
I’m not talking about when all four lines are humming and goals are coming in bunches. That part is easy. It’s when your team is fighting the puck and your style doesn’t match up well against the opponent.
Two examples come to mind. In Winnipeg, Dustin Byfuglien has a big contract, and yet his play during the regular season can be frustratingly inconsistent. But in the playoffs, when the flashier players disappear, you want big, bold Buff in the lineup.
Keeping a player for the playoffs is analogous to holding some cash, bonds or other diversifying assets when the stock market is flying high. It’s easy to chase performance and shift your portfolio into hot sectors, but that’s not likely the best move over the course of a full market cycle.
It also takes courage to be contrarian, because the most compelling opportunities don’t come gift-wrapped.
Often, the best time to buy a stock is when it feels the worst. It’s covered with dust and dirt, and might even be mired in controversy. The buy may perfectly fit your approach and long-term plan, but seldom comes with positive reinforcement from family, friends or the media. You’ll feel pretty lonely.
There’s no doubt Jets management caught a few breaks along the way. But in both sports and investing, you make your own luck with discipline, patience and courage. Go Jets Go!
Tom Bradley is president of Steadyhand Investment Funds, a company that offers individual investors low-fee investment funds and clear-cut advice. He can be reached at [email protected]