The Superbowl XLVII just finished and congratulations to the Baltimore Ravens for the exciting victory. As a sports fan in general a game of this magnitude is always exciting, even if your team is not the one playing. While I could go on and on about sports in general I thought there were a few interesting takeaways from the game that relate some of the basic tenets of successful investing.
The first thing is to get off to a strong start. When investing for retirement or saving for a college fund sustaining a large negative drop in your investment portfolio early on can have significant consequences to the long term success. Just as the Ravens built a sizable 21-6 lead in the first half of the Superbowl, when the rough patch hit in the second half they had enough advantage to weather the storm. If your portfolio is not being managed correctly for the current market environment then a major loss will create a huge hole. Future gains will have to be used to repair that hold, instead of creating new wealth or growth in your account. The 49ers outscored the Ravens 25-13 in the second half but the deficit was already to big to overcome based on the strong start by the Ravens. Don’t let your portfolio get too far behind or catching up will be difficult and promote greater risk taking in an attempt to get even.
Next takeaway from the game is to expect the unexpected. In the case of tonight’s Superbowl, the start of the second half was met with an unexpected and untimely power outage. Even with all of the planning and resources used by a business behemoth like the NFL, things can and do go wrong. The stock market is no different. Along the way things will happen that mean necessary adjustments to your investment portfolio, some of which you planned for an some of which you had not. By having good expertise and resources available when the unexpected does happen you can be more prepared to weather the “dark” times.
Lastly, dont always follow the shiny object. While the hype around 49ers rookie sensation Colin Kaepernick is warranted, it overshadowed most of the talent that was on the Ravens team. Most analysts and commentators predicted the 49ers would win easily over Ravens (the same Raven’s team that beat the top ranked Broncos AND the Patriots on the road I might add…) The stock market is not all that different. The media tends to focus on the hottest stocks, or biggest winners on a short term basis. I can remember CNBC interviewing the CEO of Netflix as the stock soared to over $300 a share. Within weeks, after when the company hit some earnings and projections roadblocks, those same commentators were reporting on how this was a company in despair and should be avoided. Markets and trends will always come and go, but getting too attached to something can be a recipe for disaster.
I hope you enjoyed the game with friends and family, maybe next year you team will be playing on Superbowl Sunday. If so let’s hope they keep the lights on for you…