The world cup is drawing to a close, and the All Blacks are just one win away from a record fourth world cup. It has been an exhilarating tournament so far, with some of the best games of rugby I have seen in a while. Watching these games has also made me realise there are a lot of similarities between investing and rugby – and that there are some real important investing lessons we can take from the game.
1. Even the best players in the world don’t always get it right
The greatest teams and players in the world are on display in this world cup. But on the day, the best players will still make mistakes. Maybe they drop the ball or miss a tackle. The All Blacks missed 31 tackles in the recent quarter final against Ireland, yet still won the game. The Irish team ranked number 1 in the world, played incredibly well, and still lost.
This is the same in investing. Even the best investors will not get everything right. According to by international financial services firm Baird, at some point in their careers, virtually all top-performing money managers had at least one three-year period where they underperformed their benchmark and their peers. In some cases, this underperformance was over 5% per annum. Yet, all these managers were still top performers over the full 10-year time span the study considered.
2. You don’t need to score from every play
Despite its fast and sometimes chaotic pace, rugby is a game of patience and trusting in the game plan. The best teams take their time, slowly moving the ball up the field, probing for weaknesses in the opposition’s defence and waiting for the right opportunity to score. When teams get frantic and try to score off every play, that is when mistakes creep in.
The best investors are also patient and focussed on the long-term. They have a clear investment strategy and stick to it. They don’t need to chase every hot new trend, but instead wait carefully for the right opportunities, where the risk and reward are in their favour.
3. Everyone on the field has a different role to play
There are 15 players in a rugby team and every position has a different role to play, each with a different set of skills and attributes required. Wingers need to be fast and nimble. A lock should be tall. A rugby team would not do well putting 15 wingers out on the field.
With investing, our ‘team’ is instead a diversified portfolio of investment assets, each with a particular role in the portfolio. Equities provide the long-term growth and inflation protection yet are more volatile. Bonds and cash provide more safety, with lower but less volatile returns. Having sufficient diversification in your portfolio helps smooth out the ups and downs.
4. Pick the right strategy for each game
Strategy and team selection can change depending on who the opposition is on the day, or even what the weather conditions are. What works against one team, may not work against another with a different playing style. Professional rugby teams spend hours analysing each opponent to determine the best game day strategy.
In the case of investing too, there is no ‘one size fits all’ approach. You should invest in line with your investment goals, risk tolerance and time horizons. The most important thing is having the right strategy for you; and sticking to it.
So, as we look forward to another exciting but stressful world cup final, it is perhaps a good time to reflect on your own investments, and whether you have the right strategy in place for your planned retirement; or that trip over to Australia for the next world cup in 2027.