Anyone who has invested for retirement knows the frustration of watching a well-thought-out plan struggle under real-world pressure. Like a golfer aiming to replicate a smooth swing from the driving range to the course, it’s easy for investors to see calm, rational planning give way to stress and reactive decisions when it’s time to execute their strategy in a volatile market.
Like warming up on a driving range, investment research and paper trading (where you don’t trade real money) feels relaxed and free of emotion. The numbers make sense, and as you back-test different stocks or funds, it’s clear what has worked and what hasn’t up to that point in time. If you track a stock and it drops, there’s no consequence. You simply move on and watch something else.
But in real markets, as on the golf course, the stakes are higher. When bear markets hit and prices drop, worries like, “What if this stock crashes?” or “What if I miss out?” or “I just lost X dollars” can lead to reactionary decisions that can jeopardize a retirement portfolio’s long-term growth. These choices often include jumping in and out of positions, abandoning long-term plans, or trying to time the market. Most of us can live with our “yips” on the golf course, but with retirement investments mistakes can add up to much larger consequences.
So how can you bring a good investment “swing” from theory into practice? First, you may need to fine-tune your investment mindset.
I once heard a comment from a golf coach that struck me: “I don’t worry about where the ball goes when I swing.” At first, this didn’t make sense. Isn’t the goal to hit great shots that roll up to the target? No, because this approach adds the unescapable pressure of outcome-obsession, which often restricts freedom and relaxation in your swing.
The same principle applies to investing. Trying to control every short-term market outcome only adds stress that leads to mistakes, much like a golfer obsessing over every shot can throw them off their awesome usual swing.
With a thoughtful investment strategy that is based off of a financial plan, prepared investors don’t need to stress over every market movement. Investors with a long-term financial plan have a long-term viewpoint that enables them to see that temporary market declines are actually a good thing. They create the “risk premium” of investing in stocks, which is the excess investment return earned by those who don’t sell in fear, and often, at the worst possible time. History has shown those who stay invested, making subtle changes and rebalancing as needed, can expect to come out ahead over more reactionary investors over the long-term and usually in the short-term.
Thus, your job as an investor isn’t to focus on perfect timing and security selection. It is instead to follow a sound, repeatable process. These Tiger Woods-esque habits include making consistent contributions during working years, broadly diversifying your portfolio so that no one investment is big enough to wreck your portfolio, and developing your goal-based financial plan that will guide your investment strategy and other areas of personal finance.
The planning part will help you during volatile periods. It will help you remain patient when you are craving big wins or fearing losses. No one is immune from these feelings as they are simple human nature. Therefore, it’s key to put trust in a disciplined process and focus on what you can control (planning, saving and investing).
This brings us to one last analogy: a good golfer and a good investor trusts their process because they have prepared for it. As advisors, arguably our greatest value is to keep our clients’ investment strategies on course through all market cycles. Retirement planning is a long game. Your success won’t hinge on a single trade or market trend but rather on the consistency of your approach over time. Whether you can achieve that on your own or with the help of a trusted advisor, if your plan is built on strong principles then good results will follow.