Fastballs & Curveballs
Did you get a chance to enjoy the Major League Baseball All-Star game this year? Reports indicate that viewership of this “summer classic” dropped yet again. As a die-hard baseball fan and a true blue (red?) Phillies fan, watching the decline in popularity of America’s pastime bothers me. I think I will get over it though.
One reason baseball comes to mind: I heard a great investment-related analogy this morning using baseball terms. From Warren Buffett: “listen to every analyst pitch, and only swing at the ones in the middle of the plate.” This quote refers to sales pitches being made by Wall Street analysts. As you may know, I enjoy Mr. Buffett’s straightforward wisdom.
Fastballs in the middle of the plate are rare, especially in the big leagues. All-Stars hit them for singles, doubles, or triples on occasion, and even homeruns. More often, batters see fastballs low and away, or curveballs in the dirt. Sliders and changeups are also part of a pitcher’s arsenal, deceptive pitches that batters struggle to hit. Not so fun fact: the Phillies struck out 18 times the other night in an extra inning game. Translation: 55% of the Phils’ outs were via a strikeout. Too many players are being fooled by tricky pitches. That is NOT good baseball.
Back to investing, however. Waiting for a fastball in the middle of the plate is difficult. Everyday, investment ideas are being tossed out there for investors to consider. In a rising market, the pressure to swing increases. But just like you shouldn’t swing at every pitch, you cannot buy every investment idea. And you shouldn’t.
Great hitters know when to swing, and use their natural abilities and long years of training to increase the chances of getting on base. To be a good investor, I have learned that you must exercise discipline over and over again, blending solid analysis with an understanding of one’s own personal situation. People ask me for investment ideas all the time. How about this one: Wait for a good idea that makes sense for your portfolio, and swing the bat.
My goal is to increase your batting average and help you improve your overall financial situation. But let me make this perfectly clear: it is not a “pastime”. The outcome makes a real difference in the game of life.
Ralph McDevitt
Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Any opinions are those of Ralph McDevitt and not necessarily those of Raymond James. Raymond James is not affiliated with Warren Buffet.
