By: George Shirley - Any opinions are those of George Shirley and not necessarily those of RJFS or Raymond James.
I have spent the better part of the last 15 years involved in youth sports…primarily as a soccer coach. At the beginning of each season, I stress to the parents and players that I will be focusing on being competitive, individual and team improvement, and our performance to evaluate the team, not results of the games. Too often we look at results (wins/losses, goals for and against) as the key metrics of whether things are working. But focusing solely on outcomes has been proven again and again to be short sighted. Many of the teams I have coached won games where they played poorly, yet managed to win because they were a better team. The performance was erratic, and certainly was not anywhere close to the level of play that they could have achieved. Conversely, some of the best performances my teams have ever had, were games against superior competition which challenged us to perform better. And when coaching youth players, the best approach is to look at long-term development while nurturing healthy behavior. A focus on results only, without taking into consideration the process to get there can cause disastrous outcomes over the long-term.
In the context of investing, trying to outperform on a quarterly or annual basis, rarely (if ever) can be done consistently. While there are times when companies, sectors and even entire asset classes can offer better value than at other times, I much prefer keeping a long-term time frame in mind with your investing habits and contributions as opposed to trying to find the best time to invest. Having a target % return…6%, 9% can also lead to excessive risk taking or even force investors to act when the best move is to take a deep breath and do nothing. Much better to have a consistent commitment to investing while revisiting your goals and objectives over time. Looking at your investments from the perspective as a future retiree, or with a mind towards legacy often changes the need to chase returns.
Focus on the right behavior, and the byproduct will be the positive outcome.