What Rory Teaches us About Investing

This past weekend, Rory McIlroy subtly stormed past the best golfers in the world to win the 2012 PGA Championship at Kiawah Island.  I served as a volunteer at the event.  Out of 136 golfers in the field, I asked for and was graciously given 1 autograph, and it was from him.  I thanked him and wished him luck.  After his win on Sunday, I was compelled to buy a Powerball ticket because I felt lucky, then I remembered that it is more likely I will be struck by lightning two or three times than to become a lottery winner.  I kept the $5 in my purse, and then thought about those few people who think the lottery route might actually be a viable way to fund retirement.  While I absolutely love the enthusiasm, I am a numbers nut, and the odds are stacked heavily against the strategy actually working.  I quickly jotted some notes about Rory’s win, because he comes across as so gracious and humble, and it is exciting to watch his success.  This is what I learned from Rory this past week:

1.  Experience Matters – At the age of 23, Rory won a major championship by the largest margin of victory in history, 8 strokes.  He broke the previous record of a 7 stroke margin set by Jack Nicklaus in 1980.  Wow!  Although people are talking quite a bit about Rory’s smashing success at such a young age, few mention that he started playing before he turned 2, and has been working at his craft for over 20 years.  Similarly, it takes years of honing knowledge and skills to become a succesful investor.  Avoid falling into the trap that it is easy to make a quick buck…it takes time and experience.  Investing is complex and it is challenging to become successful.

2.  Diligence and Hard Work are Critical –  Confidence springs from preparation.  Rors (as he calls himself) is a fitness nut, citing the importance of strength, a healthy mind, and strong self-image.  While many others golfers were hanging out at the Kiawah Resort between rounds, Rory was out running on the gorgeous South Carolina beach with his trainer.

3.  Be Humble –  Being able to rebound from a setback is critical, and can make or break both golfers and investors.  I see so many investors hold on to a losing stock just because they do not want to admit their mistake, and if it comes back they will again be right.  Usually it is a fat chance.  In the final round of the 2011 Master’s Championship at Augusta, Rory gave up a 4 stroke lead in a meltdown of poor play as the win slipped from his sights.  Going into the back nine, he was still 1 stroke ahead, and dropped 6 shots in just three holes.  Press photos showed him hanging his head and clearly disappointed.  But, his own words on Twitter reflect a willingness to take it as a learning experience, along with grace and humility: “…you have to lose before you can win. This day will make me stronger in the end…and congratulations Charl Schwartzel!! Great player and even better guy! Very happy for him and his family!”  In a press interview he stated “Shooting a bad score in the last round of a golf tournament is nothing in comparison to what other people go through.  I’ll have plenty more chances I know and hopefully it will build a bit of character in me as well.”  Perspective and attitude can not only help you learn from setbacks, it can keep you motivated to trudge through hard times.

4.  Set Goals –  Do the math.  Rory told the press that he decided going into the final round if he could finish 12 under par, nobody would be able to catch him.  He never backed off with his effort, finishing the day by sinking a long putt on hole 18 for a birdie, and scored exactly 12 under.  Flawless execution to the very end.  Everyone wants to perform well, but in addition to hard work and preparation, a specific strategy will go a long way.  Many investors do quite well amassing a big portfolio by dumping thousands of dollars into their investment and retirement accounts.  Fewer have a defined strategy (a written Investment Policy Statement is a great starting point) and benchmark or evaluate their performance periodically.  Continuous improvement is a goal of the world’s top golfers, and should be as well for investors.  Just like every stroke counts in golf, every dollar counts in your portfolio, and this is a great way to supercharge your results.

5.  Follow your Passion – “I just couldn’t get enough,” Rory said of playing golf as a child.  He stills describes golf as his “passion,” which probably makes it more enjoyable to spend hours on the range, putting greens, and practice courses.  Some players on the tour might be more focused on the pure competition, money and fame.  If you invest solely to make money, it may not become something at which you excel.  It is a long haul.  I would suggest your level of involvement with your investments should equate to your level of passion.  Those obsessed with investing can become the most successful do-it-yourselfers, while those whose interests lie elsewhere should consider hiring a fiduciary and delegating the work.

Just two hours north of Kiawah Island, Pawleys Island boasts some of the greatest courses in the world – Caledonia Golf and Fish Club, The Heritage Club, Pawleys Plantation, River Club, Tradition Golf Club, True Blue Golf Plantation, and Willbrook Plantation.  Golf course designs hail from greats including Mike Strantz, Dan Maples, Tom Jackson and Jack Nicklaus.  At the age of 12, I took lessons from Peter Duffy, the pro at Toftrees Resort in Pennsylvania.  These days, I play every few weeks, and have moments of brightness combined with lots of snowmen (for the non-golfers, that is a score of 8, which is not very good)!  I am even fortunate to live adjacent to the 16th hole at River Club, and my office windows have a view of the golfers teeing off.  I spend hours here, and from time to time look up from my work to watch the players.  But it took a young lad all the way from Northern Ireland to help me connect the dots.  Thank you very much Rors, for inspiring some ideas for better investment performance, and congratulations on your victory at the 2012 PGA Championship!

p.s. the last and perhaps most important lesson, “invest right, live right,” and consider how you can give back to your community.

Rory McIlroy UNICEF Work in Haiti – with Big Boss Mata

© 2012 Pawleys Investment Advisors, LLC.  All rights reserved.

Reducing Stress May Add $ in Retirement

Health has a significant impact on individual finances, especially during retirement.  Since stress can be a significant driver of overall health, here are 6 quick tips that can be used today to minimize stress and help maintain your health.  Reducing healthcare expenses should be a major goal within any retirement plan:

1.  Consciously work on relationships within your circle.  Put a little extra effort to stay in touch and treat people well (consider being extra nice to strangers, it may spread!).  Find a workable place for relationships with people in your life that tend to be negative.  Avoid judgement, because they may just be going through a rough patch.

2.  Organize your physical space (de-clutter) and calendar (avoid over-scheduling).  If you function well and are content with a little chaos, however, go with a little clutter!

3.  Exercise – your mind, body, and spirit.  Everyone is different so pick something that works for you in each area.

4.  Engage with the world – Set a conscious intention to have more fun after your basic responsibilities are fulfilled.

5.  Try new things and continuously learn.

6.  Be YOUrself!

© 2012 Pawleys Investment Advisors, LLC.  All rights reserved.

“invest right, live right” Investor Checklist

Like it or not, money affects just about every nook and cranny of your life.  With the proliferation of stock market information, most people randomly stumble into investing, often lacking a detailed strategy or plan.  It is challenging to wade through information and decide which sources might actually prove meaningful to your unique situation.  With just a little bit of time and effort, however, anyone at any stage of their financial life can really supercharge their results.  This is especially true for those in their 20’s and 30’s.  For the 20 year period ending in 2011, the Standard and Poor’s 500 returned 9.14%, while the average mutual fund investor earned just 3.83% (source: The Dalbar Study).  A 5% difference can equate to hundreds of thousands of dollars over the years.  The average holding period for long-term mutual funds has dropped to around 2 years, as investors allow the driving force of 24×7 news to affect their decisions.  Emotion-based buying and selling in volatile markets hampers good performance.  With a little planning and professional guidance, you can turn your money into a work-horse and change your life in amazingly powerful ways.

* Have a vision, build and work a reasonable investment plan
An important starting point for any investor is to step back.  Consider WHY you invest.  Perhaps your goal is to buy a Lamborghini, or maybe your passion is to help fund projects to provide clean drinking water for everyone across the globe.  Most people just want to buy a home, educate their families, and retire without worry.  I would encourage quiet, thoughtful time to really think about what you would like your money to do.  You might just be excited to look at a big balance in your retirement account each month, without having a clear vision of what your goals are.  That is ok!  Initiate a process that works for you to explore your vision.  You might choose to run some projections through an Excel spreadsheet, while somebody else might post meaningful photos to Pinterest.  Every investor is a unique individual, so try to find what speaks to you to capture your vision.  From your vision, you can start to work with a professional to fill in the details of a reasonable investment plan and really start to build your investment chops.

* Believe, stay positive, enjoy, be thoughtful and take your time
Investing and planning for retirement can riddle people with anxiety.  Advertising from financial firms runs the gamut from scaring you to death about not having enough money, to making it look like a piece of cake to be able to buy that gorgeous beach house.  The truth likely falls in the middle.  By having your vision and plan, you are better positioned to remain focused on things within your control, enabling you to stay positive.  Be thoughtful and take your time, and avoid impulse buying or selling at all cost.  The capital markets provide a wonderful avenue to build wealth if you know how to navigate objectively.  With negative news stories and scandals it can, at times, become difficult to keep your belief in the system, but by stacking the odds in your favor to generate solid, consistent performance, you will succeed!

* Surround yourself with people that are financially healthy
In all pillars of life, it helps to surround yourself with people that can help you improve.  They act as teachers, role models, and can share positive energy to help support your goals.  Money is a confidential topic for most investors, and those that have the most discretion often have done better financially than the bragasauruses.

* Anticipate challenges you may encounter, condition yourself to be prepared
Losing confidence can cause investors to make poor decisions.  Sometimes economic data can signal certain events in the markets, and investors can adjust portfolios accordingly.  That being said, even the most experienced top professionals encounter challenging times.  The recession and concurrent stock market drop during 2008-2009 shattered the confidence of many who had been previously spoiled by the stellar performance of the markets.  Many sold their holdings at or near stock market lows, permanently locking in losses and eliminating any possibility of recovering their money.  Utilize a strategy that forces you to buy low and sell high, because if you lose confidence and do the opposite you will cause irreparable damage.

* Regularly test and evaluate your behaviors – gauge how you are progressing, be flexible
The recent lackluster performance delivered by all-star portfolio manager Warren Buffet is well documented.  Although it is critical to stick to your strategy, you need to constantly improve what you are doing, which means making changes over time.  The market is a living, breathing entity that has evolved over the decades.  Every investment should have its quality evaluated and performance bench-marked versus an appropriate index.  QUALITY and FIT are the two key gauges for building a sound, diversified “all-weather” portfolio.  Use science in your process to remain objective, but add some subjective flare and artistry as you hone your skills.  Continuously improve your process and remain flexible, and you will do well in the long run.

* Maintain balance – proper context within the larger picture of your life and family
It is important to save and invest well, but not at the expense of building memories with your friends, family and community.  Open the wallet from time to time, and avoid becoming obsessed with your financial empire.

* Stay organized to reduce stress
You can use a shoebox or a complex cloud-based website to store your financial information.  Use whatever works for you, keep it secure, and stay organized so you don’t have to scramble for information when you need it.

As I mentioned above, the capital markets are a wonderful way to build wealth, and if you prepare well and work with qualified professionals, you too can “invest right, live right!”

© 2012 Pawleys Investment Advisors, LLC.  All rights reserved.