In February, TV stations the world over will broadcast the most-watched U.S. football game of the year. But sports fans aren’t the only ones viewing this “big game,” held in Atlanta this year. The two teams competing are watched closely by the teams that didn’t qualify. That’s because these teams can learn a lot from the contenders. In fact, “big game” teams can teach some valuable lessons to many groups and individuals – including investors.
What investment insights can you gain from observing these teams? Here are a few to consider:
A good “offense” is important. “Big game” teams usually have the ability to score a lot of points. They can run the ball, pass the ball and move up the field quickly. As an investor, you also need to constantly seek gains – in other words, you need an “offense” in the form of an investment portfolio capable of producing long-term growth. Consequently, you will need a reasonable percentage of growth-oriented vehicles, such as stocks and stock-based mutual funds, in your holdings. Yes, these types of investments carry risk, including the potential loss of principal. But you can help reduce your risk level by holding investments for the long term – giving them time to possibly overcome the short-term drops that will inevitably occur – and by diversifying your overall portfolio with other types of investments, such as bonds and government securities, that will likely not fluctuate in value as much as stocks.
A strong “defense” is essential. In addition to having good offenses, “big game” teams are also typically strong on defense. They may give up yardage, and going against a strong offense, they will also give up points, but they still often stop their opponents from making the big, game-breaking plays. As someone with financial goals, such as protecting your family’s lifestyle and helping send your children to college, you, too, have much to defend – and one of the best defensive moves you can make is to maintain adequate life insurance. Also, to protect your own financial independence – and to defend against the possibility of becoming a burden to your adult children – you may want to explore some type of long-term care insurance, which can help pay for the extraordinarily high costs of an extended nursing home stay.
The ability to adjust a strategy is essential. If a “big game” team is trailing, it very well might decide to switch its game strategy – perhaps they tried to keep the ball on the ground but fell behind, requiring them to throw more passes to catch up. You also will need to evaluate your progress toward your goals to determine if you may need to adjust your strategy. To illustrate: If your current portfolio is not providing you with the returns you need to retire comfortably, you may well need to adjust your investment mix to provide more growth potential, but within the context of your risk tolerance and time horizon.
The “big game” is the culmination of a season of hard work by two teams that have achieved the highest level of success. And by applying the lessons you’ve learned from these teams, you can help contribute to your own success.
Edward Jones is a licensed insurance producer in all states and Washington, D.C., through Edward D. Jones & Co., L.P. and in California, New Mexico and Massachusetts through Edward Jones Insurance Agency of California, L.L.C.; Edward Jones Insurance Agency of New Mexico, L.L.C.; and Edward Jones Insurance Agency of Massachusetts, L.L.C.
Sean Payne, CFP® can be reached at (562) 596-3722.