GOLF vs INVESTING

It's surprisingly similar and like to like in experience and learnings

This piece is on the back of one of the best rounds i have played ever and second to be best i have ever since i started playing from June 18.

I can't thank enough my friends Suresh KP & Gagan Ganapathy who willingly included me to play along with them on a regular basis having met over a competitive round of Golf very well know as "The Masters" at #ClubPrestigeGolfshire.

I am a Career Wealth Manager and do this for a living. Having thought through what i did right on the round where i shot 82 that's nearly half the handicap i played to on 26th March 23. I can recall of not losing focuss and keep doing what i did till the 8th hole really got me.back into the stride after making a Tripple Bogey on the 9 th hole. This is exactly the half time like in any sports. The thought i had after #putting on the 9th hole, “I am headed to another 90 like always”. However, then i gathered my thoughts and told myself it's only one hole. I haven't made a double till now, it's been pars & bogeys till the 8th.

Let me focus and do the same for the next 9 holes and that will still be a very respectable 11 or 12 than the regular late 80s or 90s i always play to. To my surprise i ended up with 1 bogey and a Double Bogey on the back 9 that's only 3 over though i had given myself 4-5 strokes playing the next 9 holes.

Now getting back to what i do and where things really get interesting

"Investing strikes me as being very much like golf, where playing conditions and the performance of competitors, markets, investment landscape can change from day to day, as can the placement of the holes on the green on a day to day basis. On some days, one’s approach to the course is appropriate, but on other days, different tactics have to be called for.”

Golf is much like investing into markets

Unlike most sports, golf is played with a stationary ball. A client of mine once candidly mentioned this, "Aneel, Golf is always hitting a dead ball, unlike most other sport". You play a shot, walk up to the ball and hit the next shot as the ball lies still. In another sport, you got to return the ball say in Tennis or a Shuttle in badminton, a cover drive, hook or cut a cricket ball being bowled to you as a batsman. You can't take all the time to hit your shot, but in Golf you can; but mind you the golf course is littered with hazards — water bodies, sand traps, thick grass. The same golf course plays differently every day depending upon the wind, or rains. And finally, there is no opponent — each player plays against the golf course itself. If you win against the course you have played a below par net game and you triumph that round that given day.

At some abstraction, this is the familiar setting of the markets. Investors do not compete directly with each other; each investor plays the game against unknown participants. The marketplace is replete with risks and opportunities and the investor has to weigh his moves carefully.

These are some of my learnings in risk-taking from the game of golf:

Get the basics right early on period.

On the practice range, you can easily tell the hacker golfer. They have a swing and posture which is highly ineffective. They may love the game but they cannot play three decent shots in succession. Also the golf swing is a very counter-intuitive movement. The golfer is supposed to use their torso and not their arms to generate the power. One can try learning this on their own with the aid of YouTube or Instagram videos, or go to a coach and take a few lessons.

Considering that an average golfer will play to the age of 75, it is a wise idea to get the basics right early on. This will need puting in some concentratd efforts say spending a little bit of time and money on a good coach.

Ditto with investing. An average investor will most likely keep playing the investing game till the end of their life. In that case why handicap oneself and play the game without getting some education and learning? Instead of relying on tips and second-hand information, it will pay enormously to read a few book, or else engage the services of an advisor / wealth manager.

Don’t be the investor who would love to make money, but keeps hacking away.

Have a #ROUTINE

Visualise Nadal every time he serves. He places his hair behind his ear, pulls his nose and adjusts his shorts while bouncing the ball. This is his pre-shot routine.

Similarly, every good golfer has a set pre-shot routine. This is any sequence of things  (idiosyncratic) that the golfer does before hitting a shot. Whether it be a weekend game with friends, clients or a club competition. The golfer will go through the same routine before hitting an important shot. Like a friend of mine told me the other day, “In golf the most import shot is the next shot”. If one can play 72 of them in succession you win everytime against the course.

The pre-shot routine becomes critical in all games which are not instinctive but contemplative. This likely happens because the ball is stationary is what I reckon too.

Going through a familiar routine calms the mind and distracts from the requirements of the shot.

It is the same with investing. The narrative of the market is unique every day; there is always a story. When contemplating a decision during volatile times, the uniqueness of events naturally weighs on the investor’s mind, making the decision seem extra important. 

A set routine helps the investor in such a situation. This could be a checklist before buying or selling. Going through a familiar check-list prevents the uniqueness of the situation affecting the investor’s mind disproportionately, and instead calms them so they can see the current situation as just another trivial situation; the next golf shot.

Focusing our mind away from the importance of a situation often helps us make better decisions.

There are times to be offensive and some call for defence so take it easy, lay up for the next shot. Let me explain this and give an analogy.

Golf courses the world over are built by sadists (like the ones who play call it) to trap golfers’ balls. They have a liberal presence of water bodies, sand bunkers, trees, bushes and impediments of various kinds.

Good golfers have a default game plan for each hole — where are they going to play their shots, what chances can be taken, etc. This is called course management.

However, the player is ready to tweak this default strategy depending upon the weather conditions and requirements of play. If there is too much of head-wind, their usual shot may not carry over the water body to the flag on the green. In this case, he will decide to go to green in two shots, the first shot being a half shot just short of the water body. This is called laying-up, a conservative play that results from the admission of the adverse situation.

The go to approach playing every hole is to play "in regulation". Every hole one gets to green to make 2 PUTs, however having layed up one is now left only one shot on the green to PUT on a regulation hole. But let me tell you i had only 33% in regulation, yet i played a net 62 that's 9 under the course given my handicap of 19 for the day on the course i played. 6 out of the 18 holes were in regulation and rest were all Up & Downs.

Personally, the #LAY-UP has had the most effect on my investing behaviour and pushed me into the value camp!. Its a different topic and we can talk this and beyond over a round or meet over or a beer.

All investors have their own personal style and risk taking profile. However, depending upon changes in the marketplace (playing on different golf courses), the smart investors need to switch gears. A market with stocks on fire everyday calls for the investor to change their stance to cautious and take some money off the table. Conversely, when stocks are trading at lows because of a market crisis, it is time to buck the consensus safe play and go on the offensive (“back up the truck and buy” – WB).

Investors cannot have one style all the time. They must be defensive most of the time (#mean reversion) and go on the offensive when opportunity presents itself (this will invariably be contrary to the crowd).

#Play freely

The difference between the good and not-so-good golfers at club level is the anxiety and apprehension that the latter have before hitting every shot. You can see their body going tense as their mind is already anticipating the different outcomes. They are handicapping themselves by focusing on the result.

Better golfers assess the situation and decide on what club and distance to hit before even stepping up to the ball. Their deliberate mind forms the tactical requirements and voices it to the body and muscles. Once they step up to the ball, they get into the familiar drill of the pre-shot routine. From here on, there is no room for the deliberate mind. The muscles and the intuitive self (#Kahneman’s System 1) are in absolute control till the shot is made. 

The relegation of the deliberate mind means that there is complete acceptance of the outcome. The golfer is said to play freely when not worrying about the results.

Imagine a volatile market presenting lucrative opportunities by way of low prices. One investor has done his homework and is ready with a list of stocks to buy. However, at the time of calling the broker or making the actual trade, the deliberate self is bound to throw up last minute apprehensions. This leads to analysis-paralysis and the opportunity passes.

If the investor has done the ground-work properly, he must execute freely without unduly worrying about the consequences.

Enjoy the game

No golfer can expect to play great every day. Some rounds are extremely good, while some days are so atrocious that the golfer is ready to quit the game. It's called the #Ruleofthirds. A 3rd if a time one has terrible rounds, a 3rd is good on an average and the last 3rd are crackers.

The insight that one gains from the more experienced (and older) golfers is that getting to play the game is its own reward.  The walk in lush green surroundings, company of friends and the banter. The winners are not those that play extremely well one day, but those who can continue playing the game for much of their lives.

“One of the most fascinating things about golf is how it reflects the cycle of life. No matter what you shot the last round or game — the next day you have to go back to the first tee and begin all over again…..”  - Peter Jacobse

Like the golfer, every investor is bound to have good and bad days. However, it is important to remember that investing is an infinite game without any end. Even if you have a windfall one day, you still have to keep playing the game. But a large loss can take the investor out of the game, permanently. 

If you like the game of investing, let your mantra be to first survive with average returns. In a few decades, you are likely to be far wealthier than today, and guaranteed to have had a great time playing the game of investing like ⛳