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The Markets, Investing and the NBA

Joe Kringdon
calender-icon Posted on June 08, 2012


I am a certified Hoop junky!  From the asphalt courts of NYC playgrounds to various hardwood courts around the world, I have played pick-up basketball all my life. I love competitive match-ups, whether among a rag-tag group of 5 on 5, the Final Four or the NBA playoffs. As such, watching the Eastern Finals in the NBA the last few weeks has been both depressing and exhilarating.

As a Celtics fan, it was quite demoralizing to drop the first two games to Miami. Yet, in the next three games they fought hard to win a 3-2 edge, only to slip again to 3-3 after game 6.  Along the way, Doc Rivers, the coach of the Celtics, never seemed frazzled or frustrated; he just asked his team to give it their best as a unit, to trust in their skills and their might as a collective. Great teams modulate their behavior and play, such that they don’t just sit on the lead if they’ve experienced a positive swing, and don’t panic if they’ve had it go against them. 

The investment markets, too, experience various cycles (read years) in which the momentum swings in favor of investors and then sometimes swings away. In either scenario, experienced investors modulate their behavior to avoid the boundaries of complacency and panic. If one views the markets through the lens of volatility and consistency, these last few years have not been kind to investors. Yet, the right mix of investments – a diversified* allocation – may have allowed them to participate in upswings and survive downswings. A successful investment portfolio is like an NBA team, with some ’stars’ who are surrounded by supporting players diverse in talent and function. You need stocks, you need bonds, and you need alternative asset classes. You need, in essence, multiple asset classes distinctively mixed together in a team built to last, survive and thrive through the runs. It also helps to have a ’coach’ to offer guidance and keep you focused through the cycles. As in basketball, having a blend of talents and characteristics that fortify your defense and supercharge your offense may help you remain competitive.

Lack of success in investing, as with some NBA franchises, can result from many factors – the wrong blend of talent and support, an inadequate time frame for these to coalesce, and perhaps unrealistic expectations for desired results. Investing is very personal. Financial goals and time horizons should be established based on thorough, thoughtful and deliberate discussion, with the help of some professional guidance. Ignore the fans (in this case the media), and take careful steps to find the right timeframe, the right blend and the right coach!

*Diversification does not ensure a profit or protect against loss in a declining market.

 

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