Five Rings. Five Things.
The Rio Olympics recently ended with the athletes and host country putting on quite a show. The Summer Olympics occur every four years and for a brief moment in time most of the world stops to root for their home country.
Here are five things I learned while watching the Rio Olympic Games.
1. All athletes are created equal but some are more equal than others. Michael Phelps, Simone Biles and Usain Bolt are in a class all to themselves. The level of athleticism and dominance they displayed in Rio is beyond parallel. The other athletes are phenomenal and sometimes the distance between winning a gold medal or a silver medal is less than 1/100th of a second. In your investment portfolio you may own two or three stocks that are superior to your other holdings. A diversified portfolio of stocks will have a number of good companies but a few of them are outstanding and produce returns well above the rest. These few stocks can turn a mediocre year into an incredible year. If you are fortunate to own a few of these superior companies, it’s best to let them run so they can continue to produce amazing returns for your accounts.
2. Two are clearly better than one. Abbey D ’Agostino and Nikke Hamblin weren’t household names prior to the Olympics until they crashed over each other during the 5,000-meter qualifier. The two runners got tangled on a turn and fell and then helped each other to the finish line. These two young ladies exemplified the Olympic spirit and will now forever be recognized for their sportsmanship. A diversified portfolio of stocks is needed for long term success. A diversified portfolio of tens, hundreds or thousands of stocks is needed to produce superior returns. A diversified portfolio will help you in the event one of your stocks crashes and loses its luster.
3. The athletes train their whole life for a few seconds of glory. The 100 meters is run in under 10 seconds but the athletes put in thousands of hours on the track to try and perfect their craft. A high jumper, long jumper and pole vaulter practice their jumps repeatedly until they know the exact distance and timing needed to complete their jump. Lionel Messi said it took him 17 years and 114 days to become an overnight success.[1] To achieve investment success, it helps to think long term. It may take years before you start to see gold medal results from your investment efforts.
4. A few bad apples can spoil the whole bunch. Four swimmers from the United States embarrassed the host country, the U.S. Olympic Committee, their teammates, their home country and themselves for fabricating a story about being robbed at gun point. Their story cast a pall over the Olympics as their actions took attention away from the glory of the games. These four individuals should have told the truth from the beginning or at least cut their losses when they realized they were in over their heads. A bad investment can bring down your entire portfolio if you let it become a distraction. It doesn’t make sense to pour good money after bad so when you have an investment performing poorly it’s best to cut your losses and move your money into a company that may provide you with a better return. A losing stock position will take your eyes off the rest of your account and you’ll lose focus (and maybe sleep) worrying about the poor performer. Be honest with yourself when reviewing your holdings. Do you need to come clean with some of your losers?
5. The five rings of the Olympics represent the five world continents. The interlocking rings are designed to show a united world. The Olympic games are designed to bring the world together for a few weeks every four years. The games are a nice reminder of what a peaceful world looks like when all the athletes come marching into the stadium during the opening ceremonies. The goodness of the games prevails. Doing good works and deeds for others should be included in your investment and estate plan. Can your resources help others? Do you have assets you can donate to your favorite charity or cause? A review of your investment holdings and personal goals may provide gold to the people you assist.
The Summer Olympics are now over and the world is returning to work so now is a good time to review your investments to see if the can perform faster, higher or stronger.
I can do all this through him who gives me strength. ~ Philippians 4:13
Bill Parrott is the President and CEO of Parrott Wealth Management, LLC. www.parrottwealth.com
August 28, 2016
[1] http://motivationalgymquotes.com/quotes/it-took-me-17-years-114-days-to-... Accessed 8/28/2016.