Each year, the best 128 male and 128 female tennis players in the world make their way downunder to contest one of only four grand slams played around the world. Of each 128, one wins and 127 go home disappointed.
When this happens, we always think of the world’s greatest investor, Warren Buffett, and his first rule of investing: don’t lose money. There is, after all, one thing that all the winners of the Australian Open have in common – they are the last man or woman standing. We could re-write the rule of investment to be the first rule of tennis: don’t lose a match.
Think about it: Ash Barty has always won a lot of games of tennis. But she really became a star when she stopped losing them. (Taking that beautiful baby to the press conference was pretty impressive, too). And think also of the long-time record holders: Novak Djokovic and Serena Williams have each won the Australian Open seven times. That’s 49 games of tennis without losing a single one. (Novak might be about to make it 56!)
If Warren Buffett played tennis, he would use a racquet like the one in the photo. Anything to make sure he did not lose. Because the person who does not lose is the person who ends up winning.
There are millions of tennis players around the world, but only 128 places in the big Grand Slams. So tournaments like the Australian Open don’t have all that much in common with you and I. Happily, investment markets are a lot easier to get into than the main draw of the Australian Open. Investment markets are not like big international tournaments that roll around once a year. Investment markets are more like the local C Grade pennant that is played every Tuesday night, rain, hail or shine. “All are welcome; no particular ability necessary. Please bring a plate for supper.”
Even better, investment markets behave a lot like Tuesday night pennant, as well. That is because in Tuesday night pennant, the game is lost by the loser, not won by the winner. The ‘winner’ is rarely the player who serves the most aces. The winner is almost always the player who serves the fewest double faults. Tuesday night winners know that all they need to do is keep the ball in play and wait for the other player to bang it back into the net.
On Tuesday nights, if you don’t lose the point you end up winning the point. As Buffett tells us, this is just how investing works: if you don’t lose money, you end up making money. So, successful investors don’t play too aggressively. They avoid going for the big winner down the line – and avoid the risk of the ball going wide or long. Patience is their virtue. Just like Tuesday night’s champion.
Helping you keep your ‘investment ball’ in play is our job as advisers. Think of us as your investment coach, showing you how to play investment ‘shots’ that land well in the middle of the court, every time. Helping you become your very own version of Novak, or Serena – or Warren (which is even better!).
Investing is just like Tuesday night tennis: if you don’t lose, you end up winning. Game, set and match.