What Do World-Class Athletes and Investors Have in Common?

DEWITT, Mich. - Sept. 19, 2016 - PRLog -- Discipline is required of the world's best athletes. It's no surprise that discipline is also critical for a successful investor. So how can you as an investor learn from professional athletes to help achieve your investment goals?

Investment Strategist Kate Warne talks about three lessons you can learn from world-class athletes.

  1. Discipline Is Important
Few people know better than world-class athletes that discipline is important. Practice makes perfect. Regularly reviewing your portfolio and letting your financial advisor know if you've experienced any changes that may affect your progress toward your goals is important. Remember, you're not in this alone – your financial advisor is like a coach to help keep your strategy on track. If you don't stay invested, you're less likely to achieve your long-term financial goals. Staying invested over longer periods of time has improved the chances that investors earn positive returns.¹

  2.  Leaders Rotate
In many athletic competitions, like cycling or swimming, the leader can rotate frequently. This also occurs in the financial world and can describe investment performance. "Leaders rotate" is a phrase that happens when one investment type can be the top performer one year, but just as easily end up in the bottom spot the next. A successful team needs to combine athletes who have different talents in the appropriate order. That's true for your portfolio, too. We recommend diversifying with a carefully selected combination of investment types to help smooth your portfolio's performance over time.²

  3.  Expect the Unexpected
Just like an athlete can have an "off" day, so can the market. Although neither can be predicted, it is important to be prepared and expect the unexpected. Stock market volatility is likely to increase due to international events, worries about earnings and the near-term uncertainty of November's elections.  Since it appears that many voters are voting against the other candidate, the commercials and headlines are likely to be more negative than usual.

In addition, the conditions supporting higher stock prices over time, including modest economic growth and better corporate earnings, also mean the Federal Reserve is considering its next interest rate increase.  Despite the improving job market in June and July, we think it's likely to continue to wait for better economic data before raising rates. That means interest rates are likely to rise only modestly, staying lower for longer. As a result, we continue to think bonds play an important role in portfolios because their prices tend to move in the opposite direction from stock prices, and that can help stabilize portfolio values when stocks are volatile.

Refine Your Form

You don't necessarily need to shake up your investment strategy, but you may need to make slight adjustments, like athletes refine their form. Talk with your financial advisor to see if you should rebalance your portfolio to an appropriate mix of stocks and bonds. In addition to large-cap U.S. stocks, broad-based international stock investments and stocks of smaller companies can help improve diversification. Remember to keep your eye on the finish line: your long-term financial goals.

Important information:

¹Source: Morningstar Direct, 1/1/1926 - 5/31/2016. Past performance is not a guarantee of what will happen in the future.

²Diversification cannot ensure a profit or protect against loss.

This information is for educational and illustrative purposes only and should not be interpreted as specific investment advice. Investors should make investment decisions based on their unique investment objectives and financial situation.