A Day At The Races
I spent last Sunday at the races with my mom and daughter. We had a great time despite the cold and drizzly weather. We arrived early, stayed late, and bet often.
I grew up near the Santa Anita racetrack. My high school was across the street, so I was a frequent visitor. In addition, my daughter has been riding horses since she was five, so it's a sport we bond over.
After downloading the daily racing forum, we examined each horse's sires and dams and spent the evening handicapping the horses. We reviewed their previous workouts, race performances, owners, and trainers. At the racetrack, we got the official daily racing program that includes some data on the horses and riders. We were ready.
On race day, we bet on our selected horses. Our strategy and system worked well as we finished in the money for seven of the nine races. We hit an exacta in the eighth race and missed another by a nose in the sixth.
We bet conservatively for most races, but when we felt convicted, we upped the ante and pressed our bets. We felt confident in our system because we spent time doing our homework. If we only relied on the official program, we would have performed poorly. It would have been a guessing game, picking horses based on the jockey's colors or some other random item.
At times it appears people pick investments based on random facts or data points that won't move a stock's price. Rather than doing their research, they choose investments from a tweet, text, or tik-tok video. If you hear about a stock on CNBC, it must be a good investment. Right?
Don't leave your financial future to chance. Instead, take time to learn something about your investments. Here are a few tips you can use to increase your odds of success.
- If you're buying a stock, review the company's mission statement, financials, price charts, and competition. Yahoo! Finance is an excellent data source. Digging into a company's financial history can give you an idea of its future.
- If you're buying a mutual fund or ETF, review the fund's objectives, managers, expense ratios, holdings, and the other funds in the category.
- How much can you invest? Do you want to own several stocks, or do you want to place your bets on a few long-shots? If you have buckets of money, you can own many companies. However, if your resources are limited, owning a mutual fund is more prudent.
- What is your risk management strategy? Will you let your winners run? Will you sell your losers? Will you buy the dip? Create a plan and follow it. Don't let your emotions ruin your portfolio.
- Review your trades, especially if you lost money. Why did your investment fail? What happened? How can you improve your trading based on your experiences? For example, in the sixth race, we lost an exacta because our horse came in third, not second. After the race was over, I reviewed our process to see if we missed anything. We didn't. Our horse was solid; it just got beat.
- Celebrate your success. If you made money on a trade, take a few chips off the table and celebrate your win. It's okay to spend your winnings on things you enjoy.
If you're inclined to work harder than the next person, you can win at the races, in the markets, and life. Unfortunately, few people are willing to go the extra mile, but I know you can do it. I'm betting on you to win!
And away they go!
A good rider can hear her horse speak to her. A great rider can hear her horse whisper. ~ Anonymous.
"Do you give the horse its strength or clothe its neck with a flowing mane? Do you make it leap like a locust, striking terror with its proud snorting? It paws fiercely, rejoicing in its strength, and charges into the fray. It laughs at fear, afraid of nothing; it does not shy away from the sword. The quiver rattles against its side, along with the flashing spear and lance. In frenzied excitement it eats up the ground; it cannot stand still when the trumpet sounds. At the blast of the trumpet it snorts, 'Aha!' It catches the scent of battle from afar, the shout of commanders and the battle cry." ~ Job 39:19-25
May 19, 2021
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM's custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.
Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren't suitable for every investor.