The National Football League can prove statistically that top running backs, such as Marshawn Lynch of the Seatte Seahawks, have a football lifespan of approximately 2,000 ball carries in their careers before their productivity falls off a cliff. Major League Baseball has similar statistics for the number of throws their pitchers toss. There is even a website, www.pitchsmart.org, which offers a unified set of optimal guidelines on pitching usage for different age groups to aid in injury prevention.
My two points are these. Once running backs approach that 2,000 number, team managements know their value is greatly diminished, and players’ contracts reflect this fact. In addition, football coaches know that these carries must be strategically allocated, just as baseball coaches carefully track the number of throws their top pitchers deliver. They, too, are managing a depreciating finite asset.
Are investors the same? Let me pitch this question to you. Do we investors also have only a finite number of winning trades in our lifetimes? I haven’t seen any rigorous academic research on this, but there is plenty of anecdotal material to support exactly that theory.
My personal experience and beliefs concede that there are indeed parallels between us traders and our sporting brethren. Having said that, I also believe it’s possible to extend one’s investing career and thereby expand the theoretical finite 2,000 number of trades or whatever the number might be.
Unlike pro athletes, we individual investors do not necessarily have to perform on a schedule and under any contract. In the case of a pro athlete, the team needs them to perform irrespective of fatigue or any other warning signs – even if performing means risking possible injury. Herein lies the great advantage that investors have over athletes.
We don’t have to swing at every pitch. We don’t have to accept a specific ball-carrying assignment. We can wait for exactly the perfect pitch thrown at our personal sweet spot or accept the ball carry only if there’s a 20-yard open gap in the opposing team’s defense.
We individual investors can also determine our own investing schedule. From experience and based on the seasonality calendar, I am much more active in the markets as a trader and teacher starting in the fall and running through April or so. I’m much less active in the summer months for a whole host of reasons, not the least being that I need to recharge my batteries. I can do this. I don’t have to answer to clients.
Herein, the institutional money managers have much more in common with pro athletes. They have employment contracts, they must perform all year round, and they have a boss (much like a coach) to whom they must answer.
My personal mantra has always required that when I’m in trading mode, I have to be 100% there when I pull the trigger. If I can’t be or if I realize I’m not, then I simply won’t trade.
The corollary to this is that through all my decades of experience, I know that recuperation and rest are essential if I am to keep up both my physical and mental investing mojo for six months a year.
It’s just too tough to be “in the game” for twelve months of the year. No professional athletes have year round schedules, and I submit that investors or traders who ignore this fact are not dissimilar to the guy on the old Ed Sullivan Show whose act required frenzied and exhausting efforts to keep all the spinning plates aloft on their poles.
Don’t be like one of those young bucks for whom the stock market is 24/7 catnip. These over-caffeinated traders flame out in a relatively short time. Spread your productivity over years by learning to read your own mental and physical well-being. Ignore the catnip and aspire instead to become a stock market whisperer in the long term.
Trade well; trade with discipline!
-- Gatis Roze