Win the Game

“You play to win the game.”?

Those were the words of former NFL coach Herm Edwards, who delivered an entertaining rant that went viral back before the term viral went viral.

Beyond the humor, his simple statement was correct. The goal of any team, any coach is to win the game. Sure, big plays and lighting up the scoreboard is fun. But, the goal is simply to win the game.

That’s an important message for investors as well. Scoring the most points (high returns) is nice, but the goal is to win the game (achieve your financial goals).

But, you may be asking, “don’t those go hand-in-hand?"

"Aren’t higher returns going to more easily help me win the game?”

And, yes, you need enough return to achieve your goals. You do need to score enough points to win.

Let’s think about this from a football coach’s perspective again. Say the coach had a goal of achieving the highest returns by scoring the most points ever scored in a game. His strategy may be to throw deep passes over and over again. After all, in order to score the most points, you need to score fast. And passing the ball deep down the field is the best way to score fast.

It’s also one of the best ways to make catastrophic mistakes—throw an interception, take a sack and fumble. Those setbacks could lead to the other team scoring points. So, as you can see, that high-return strategy also has a higher risk of going the other way.?

And, the same is true for the investor. An investor seeking high positive returns must also recognize such a strategy may leave themselves open to high negative returns. And, those negative returns are what could reduce your chances of winning.

Such an experience may increase stress, anxiety, and poor judgement. After the football coach experiences his third interception, he may feel pressured to abandon the strategy at a time when the team is now losing.

Likewise for the investor after experiencing a severe downturn. They may decide to abandon the markets altogether. Thus, the high returns you were hoping to achieve are dashed now that you’re no longer in the markets. Now, you have real risk of not winning the game.

This is why it’s so important to understand where you are in the game; where you are on your investing journey. If you’re a young investor with a goal decades into the future, you may be in the opening quarter of the game. You’ve got time to make mistakes and learn. You may fall behind by a touchdown or two, but you’ll have opportunities to recover.

If you’re an older investor, closing in on retirement, you’re in a much different part of the game. You may be in the 3rd or 4th quarter. If you’ve built a sizable portfolio, you may be up two or three touchdowns. You’re in position to win the game. The last thing you want to do is introduce risks that could jeopardize that victory.

So, you want to run a playbook that keeps you in the lead. Relying on the big play is not as important anymore. Now, it’s all about solidifying that lead. A football coach may choose safer plays, decide to run the ball more often. The investor could choose a more balanced portfolio that reduces volatility.

Growing wealth is different from maintaining wealth. They require different mindsets and different strategies.

Far too often, though, I see people running a higher-risk growth strategy when, based on their assets and goals, they may be better off running the more balanced maintenance strategy.

I understand why they want to keep playing fast. It’s hard to make the adjustment mentally. It runs counter to their entire experience as an investor...

“I got rich by loading up on high growth investments, running fast, seeking high returns. Why change now?”

Today’s markets are amplifying that seductive risk. They’ve made the deep passing game--mega cap tech, for example—feel like the winning ticket even for those who have already won the game. It’s been delivering high returns with seemingly little risk.

But, what the market gives, it can also take. What seems riskless today can feel reckless tomorrow. It seems like a distant memory now, but in 2022, many large growth stocks were down more than 50%. That may be less of a problem if you’re 30 or 40 with more money to plow into those companies. It may feel very different if you’re about to retire.

Here’s the point: You only have one life so you only have one game to win or lose. There are no redo’s. If you’re in position to win the game--for your investments to help you live your desired life--then dial up plays that will give you the best chance of solidifying that win.

Focus on protecting your fortune. Protecting your financial goals. And, most especially, protecting your future possibilities.

Mike on the Money on TV

This week’s tv segment focuses on the investors’ rollercoaster ride. As mentioned above, the stock market offers great opportunities to grow wealth if you have time on your side and patience to handle the ups-and-downs.

Here we offer insights for creating a more enjoyable ride.

Be bold, love your life and keep investing in your passions!

?

This material is provided as a courtesy and for educational purposes only.? Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.?

?All views/opinions expressed in this newsletter are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC.