Money Lessons for Lawyers From the Ball Diamond
April is one of my favorite times of the year. Certainly not because of the lovely April weather here in Chicago, but because normally it means baseball season is getting into full swing. Unfortunately, the start of the baseball season has been pushed off a bit due to the impact of COVID-19, but it will be here soon enough. I thought I’d have a little fun with this blog and see what money lessons lawyers can take from America’s past time.
Take the Long View
The baseball season is a veritable marathon – 162 games over the course of roughly six months. Unlike football where every single game is critically important, in baseball you have to manage for the long run and position your team for the playoffs. Managers will often rest key players here and there or put their pitchers on an inning count to make sure they don’t exhaust their team during the regular season and run out of steam come playoff time.
In many ways, investing should be thought of the same way. Investing is very much a long-term endeavor. During really volatile markets like we’ve seen since the market peaked in late February, many investors have fixated on the daily swings in the market. That is a recipe for poor decision making. If you try to zoom out, take a truly long-term perspective and understand that over time stocks go up about 2/3 of the time you’ll be much more able to stay in the game when stocks get rocky. If you instead focus on the daily gyrations of stocks you are much more likely to make dramatic shifts in your portfolio which will likely hurt you in the long run. As a lawyer, consider retirement the playoffs. You want to make sure your portfolio is built in such a way that you are in prime position when it’s time to ride off into the sunset and life after the law.
Different Players for Different Roles
A good General Manager knows the value of role players. A great manager understands the value of putting players in the right position to help the team. Not everyone can be the starting shortstop and bat third in the lineup. Not everyone gets to be the ace of the pitching staff. Championship teams need great pinch hitters and solid utility infielders who can fill in for stars when needed.
The same is true for your portfolio. Different investments play different roles. It’s not all about growth, sometimes it’s about downside protection and stability. Over the long-run stocks will provide most of the growth in your portfolio, but of course stocks are also the most volatile and can have periods with steep declines. Bonds, while not necessarily providing a ton of growth, can provide very important stability when stocks hit the skids. The stability that bonds provide can help you stay in the game when stocks are struggling and the two complement each other like good teammates should. When taken together in a well-diversified portfolio you have a much higher likelihood of being happy with where you end up at the end of the season.
Spring is in the air and baseball should be right around the corner. Hopefully, you’ll have a chance to take in a game once the season starts and when you do, remember these key points to help you be a better investor.
Justin works closely with clients to design wealth management plans that take into account the full spectrum of their career and personal concerns with a specialization in advising law firm partners. Justin earned his MBA from Northwestern University’s J.L. Kellogg School of Business.