You’ve probably heard enough about the election, so I’m not going to comment any more on what it may mean for your portfolio or anything like that. You can read what I wrote about it here if – for some reason – you can’t get enough of Harris and Trump.
Instead, I’m going to talk about something way more important today.
Baseball.
I grew up 20 minutes from Yankee Stadium and have been a die-hard Yankees fan my whole life. I even worked for the Yankees organization for a season. So watching them lose the World Series to the Los Angeles Dodgers last week was tough.
The Dodgers are one of the most consistent, well-managed teams I’ve ever seen. They don’t make many mistakes, and they do all the “little things” right.
In a lot of ways, they actually remind me of a successful investor.
Hear me out.
When the Dodgers’ Shohei Ohtani, who’s one of the best players in baseball (after Yankees center fielder Aaron Judge, of course), went down with an injury in Game 1, it rendered him ineffective for the rest of the series.
But the Dodgers didn’t miss a beat. They stuck to their game plan, won the first two games of the best-of-seven series, and ended up closing out the Yankees in five games.
The most important point in the series – and the moment when I was most impressed with the Dodgers – came in the fifth inning of Game 5.
The Yankees were winning 5-0 when Aaron Judge inexplicably dropped an easy fly ball.
A few minutes later, sure-handed shortstop Anthony Volpe made a bad throw, which loaded the bases for the Dodgers.
After the next two Dodgers batters struck out, Mookie Betts – a terrific player and former MVP – hit an easy ground ball to Anthony Rizzo, the Yankees’ first baseman. Rizzo assumed the pitcher, Gerrit Cole, would cover first base, so he prepared to throw the ball to Cole for the out. But Cole, thinking Rizzo would run to first himself, slowed down.
Meanwhile, Betts, knowing how high the stakes were, sprinted down the line – even though many players don’t run particularly hard to first base after hitting a routine ground ball. Rizzo, realizing that he’d need to get Betts out himself, hustled toward first base, but Betts beat him there, giving LA a run and keeping the Dodgers’ inning alive.
The Dodgers ended up scoring four more runs in the fifth inning to tie the game, and they went on to clinch the series a few innings later.
There were numerous big hits, clutch pitches, and strong defensive plays that contributed to the Dodgers winning the game and the series. But they won that game because Mookie Betts didn’t give up on an easy ground ball. He ran hard the whole way.
It’s rare for a team to win a championship without doing those little things right. Home runs are exciting, but the small things that don’t make it into the highlight reels – like taking an extra base, making the right throw, or running hard when others might not – are what ultimately lead to putting a championship ring on your finger.
Investing is the same way.
Sure, we all want those “home run” investments, where one of our stocks goes up hundreds of percentage points. It’s certainly exciting when that happens.
But the way to help your portfolio win a “championship” – that is, provide you with the nest egg and/or income that you need in order to live the life you want – is by making sure you do the little things.
So what are those little things?
1. Stay invested.
The most important factor in investing success is not which stocks you pick. It’s how long you stay invested. The longer you’re invested, the better results you’ll have.
In last week’s Oxford Income Live, a live monthly video discussion with Oxford Income Letter subscribers, I talked about the stock market’s returns during each presidential administration going back to President Eisenhower. The top five performances were for two-term presidents (and, notably, it was a mixture of Republicans and Democrats). Since the market goes up over the long term, it makes sense that it would do better over a random eight-year period than a random four-year period.
2. Keep putting money to work.
The hardest thing to do is to keep buying when the market is falling. Yet that’s exactly the action you should take.
You’re never going to time the market perfectly and know when the bottom has just occurred. But if you invest at regular intervals – whether that’s monthly, quarterly, twice a year, etc. – you will ensure that you’re buying during both bull markets and bear markets, and the prices will even out over time. Importantly, you also won’t miss out on big bull runs that you never saw coming.
3. Manage your risk.
Use trailing stops so small losses don’t become big losses. Also, position size accordingly. Don’t have too much exposure to any one stock. The Oxford Club recommends that you invest no more than 4% in any one position – and if you’re taking a big swing on a speculative trade, you may want to keep your position size even smaller.
Be Like the Dodgers
As a Yankees fan, I’m already saying, “Just wait till next year!”, but as investors, we don’t have that luxury. Every year that goes by without us doing the little things costs us money and shrinks our portfolios.
It pains me to say this, but be like the Dodgers and do the little things right.
Good investing,
Marc
P.S. What other “little things” can you think of that are essential to being a successful investor? Let me know your thoughts in the comments below. (And if you’d like to offer me your condolences about the Yankees while you’re at it, I wouldn’t mind.)