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When Novak Djokovic played Matteo Berrettini in last week’s Wimbledon final, you could have watched MOST of that game and marvelled at the skill level of both players, which were very evenly matched. The problem for Berrettini was in the rest of the match, where skill did not prevail. What went wrong? What is the lesson for us as investors as we try to become fund experts?
After some baseline ping-pong, it was as if Matteo got bored – and this kept repeating. He would suddenly throw himself and his racket at the ball, straight back at Novak, and invariably beyond the baseline. He made 47 unforced errors – Novak made 21.
Why he was so impulsive is a matter for his coach to unravel. Is he ill-disciplined? Was it nerves? Does he struggle to concentrate? Is it just the lack of experience, which will soon solve itself? We don’t know – we just need to observe that impulsiveness.
He probably knew about this weakness before the match – you can be darn sure he knew about it afterwards.
That impulsiveness is the opposite of the behaviour of the top achieving professionals, or those with a professional mindset.
Mostly, high achievers need skill, discipline, and luck – pro’s never underestimate the need for a little luck!
The precise mix varies between professions and sports.
For example, a dentist shouldn’t need luck, but a weatherman does. A tennis player will need more discipline than a footballer, and a footballer can benefit more from luck.
And as an investor? Let me come back to that in a minute.
Sport has always been a great place to observe the interaction of those three factors in contrast to more private pursuits, such as your own investing.
One of the greatest baseball hitters (Ted Williams, 1918-2002) wrote a book called The Science Of Hitting.
He identified that when people make bad decisions, they disregard what they know, ignore coaches, and become impulsive. They stop thinking clearly.
You must know when you have an edge – but also know when you haven’t.
A lot of people confuse familiarity with knowledge. You can become familiar with investing generally, and funds in particular, reading the weekend press. But this is not knowledge – it is more likely a distraction.
We believe we have understanding when all we have is knowledge. For example, seeking out the top 10 holdings of any fund before you buy it. This tells you nothing about your likelihood of success.
Of all the things you do understand, and those you can control, which are most likely to vastly increase your likelihood of success in becoming a fund expert?
Know the game you are in. When you are investing, you are pitching yourself against some of the smartest SOBs in the world, investing many billions, and with the most powerful computers at their disposal.
Once you acknowledge that, you need to figure your edge, otherwise you might as well buy an index tracker, or seek out an adviser who can illustrate an investment edge.
You can’t play the big boys at their game. You will fail.
So play the game your way, in a way in which they can’t, and where the odds are stacked in your favour. More on this today in this blog -
Avoid Tracker Trash, and in next week’s teleconference.
Ted Williams understood that it is the process by which you make decisions which is key – that process is part of your skill. It is all about moving the odds of success in your favour. A good process, a proven process, increases the odds of much better outcomes.
As an investor, that process can be very straightforward, such as using Dynamic Fund Ratings. From that point it is the discipline you apply which is the difference between success and failure. A little luck is the icing on the cake.
The latter encompasses the professional mindset you need to achieve consistent long-term success.
Keep any tendency to impulsiveness in a box.