As golfer Davis Love Jr said, “A routine is not a routine if you have to think about it.” The thinking should be done ahead of time! Careful investors create a routine for how they will respond to a variety of market conditions. This allows an investor to adapt as market conditions change through a thoughtful, disciplined process rather than making decisions in the grips of market emotion. Most successful golfers do not change their swing technique in the middle of a round. Instead, they know their technique, equipment, and skill set well enough that they know how to adapt to weather, fast greens, or a difficult lie.
British golfer Harry Vardon (featured in the movie The Greatest Game Ever Played) stated, “For this game you need, above all things, to be in a tranquil frame of mind.”
Golfer Tom Watson admitted, “The person I fear most in the last two rounds is myself.”
Vardon and Watson could just as well have been speaking about investing. Behavioral mistakes in the form of emotional, irrational decision-making are significant threats to sustained success in investing. How do we feel when, the TV, radio, and internet are shouting at us about an imminent market crash? Conversely, do we become overly confident after seasons of strong performance?
All of us have played rounds of golf when a particularly bad shot seems to linger for several holes. Does a sound investment strategy with temporary performance that looks different from the “market” linger in our minds and lead us to bad decisions?
Golfer Chi Chi Rodriguez said the following, “I’ve heard people say putting is 50 percent technique and 50 percent mental. I really believe it is 50 percent technique and 90 percent positive thinking, see, but that adds up to 140 percent, which is why nobody is 100 percent sure how to putt.”
Just like there is not one perfect method of putting, there is not a perfect investment approach or ideal ETF selection process. There are many approaches that will lead to success if carefully followed over time. However, disciplined, steady, objective, rational thinking and behavior is a requirement for sustained investment success, no matter the investment approach.
After watching professional golfers surrounded by galleries of people, cameras, and pressure, I was astounded by their ability to filter out the “noise” and focus on the next shot.
As Ben Hogan said, “The most important shot in golf is the next one.”
The concept of “always a next shot” is a wonderful, yet challenging element of ETF investing. Successful investing is always about creating future income and future return.
Whether investing for an institutional fund or for a family saving for retirement, we never plant the flag, declare victory, and end the pursuit of capital preservation and growth. Investing is like playing an endless round of golf—there is always another hole to play. There is good news—there is likely an “ETF club” that can make a positive difference as you approach your next investment shot.
John Lunt is the President of Lunt Capital Management, a participant in the ETF Strategist Channel.