In Golf and Stocks, Anything Can Happen

Verizon Heritage Practice Round in Hilton Head, SC April 13, 2010

Last weekend, I went on a three-day “golfing vacation” with seven friends and let’s face it, you never know what can happen.

Four of us were scheduled to leave on Friday afternoon at 4:40, but we actually took off at around 10:15 in the evening, so we had five mind-numbing hours of male bonding. Not surprisingly, other than complaining about the guy who booked the flights (me), we really didn’t have any meaningful conversations. (My wife is always surprised that guys don’t use times like these to share deep personal feelings.)

After more than three hours in the air, we had landed in Fort Lauderdale and gathered our luggage.

Things were looking up, but not for long.

We had to get to the rental car pavilion, and despite the fact that it was 2:00 in the morning, the sidewalk was packed with people trying board the car-rental bus. Fortunately, we were able to squeeze onto the second one that pulled up.

Of course, the rental car company didn’t have our reserved vehicle. Worst of all, I was the person responsible for reserving the car as well.

I got another earful from the guys.

Luckily, after what seemed like a lifetime, our service rep booked us an SUV that could hold all of our luggage and golf equipment. We finally arrived at our hotel (not exactly the Ritz), and I was looking forward to getting a few hours’ sleep before our 7:00 A.M. scheduled breakfast.  We registered quickly and headed up to our rooms.

Guess what?  My key card didn’t work!

Back at the registration desk, the clerk sort of apologized and gave me another key.

That key didn’t work either!

I grumbled back to the desk for a third time, bag and luggage in tow.

“Are you sure you’re using it correctly, sir?” the clerk asked dispassionately.

I may not be the brightest bulb, but I have been in enough hotels to know how to open a door.

“Yes,” I said in a frustrated tone.

He then gave me the third set of key cards to my room.

You guessed it…

At this point, if I could have beamed myself home, I would have.

My unemotional friend, the night clerk, did not appear surprised to see me again.

“I’ll come up with you,” he offered.  What a guy.

He tried my key and Voila! It didn’t work (thank God). He had a master key and finally the enchanted door spun open. I walked into a very musty-smelling room, and the clerk made his exit without waiting for a tip, which was pretty smart because he wasn’t getting one.

I set my alarm for 6:30 A.M. and finally placed my head on the pillow at ten minutes before four.

I suppose there’s a lesson to be learned from all of this: no matter how much you plan and prepare, you never really know what can happen.

This certainly applies to the stock market.

So, what’s a good 2016 game plan? Strategically, investing is sort of like golf; the better golfers in my group played it smart and consistently engaged in course management. Here’s an example: if you need to place a 225-yard shot over a strategically placed pond, it probably makes good sense to lay up rather than lose a ball and end up with a “snow man” on that hole.

The same theory applies to the markets. If an investor preparing to enter retirement is reviewing his or her current portfolio at the end of 2015 and is dissatisfied with their performance, it probably doesn’t make sense to bet on a quick turnaround in something like crude oil prices. Instead, designing an approach that limits losses becomes critically important in achieving long-term results.

Here’s a quick quiz to illustrate the point:

Let’s say your goal is to generate healthy 10% annual return on a $1,000 investment. The balance at the end of year three will be $1,331. Let’s say in year one, your portfolio attains the 10% rate of return (RoR), but in year two, it drops 10%.  What RoR is required in year three to hit the target of $1,331?  Is it 10%, 15%, 25%, or none of the above?

The answer is none of the above. You would need to generate a 34.4% return in year three!

Here is an annual breakdown.

Initial Investment Year One Year Two Year Three
RoR Year-End Total RoR Year-End


RoR Year-End


$1,000 10% $1,100 -10% $990 34% $1,331


For the record, the Dow is currently down 9.66% over the past twelve months, and based on a 100% equity investment, your performance would not be far off that negative 10% mark. Put another way, assuming you invested $1,000 in equities 12 months ago, with a 10% annualized return target, you would need to generate over a 22% return to get back on track.

Good luck with that.

How do we play it smart and manage our portfolios? Simply diversify between stocks, bonds, cash equivalents and insurance products that guarantee your principal. If your portfolio was limited to 50% in equity positions, you would have lost around 4.5% (assuming a .05% return in bonds and cash). Effectively, you would have been ahead of the game by 5.5%. Also, remember that after a market pullback, the road back to break-even can be rocky and quite steep, so always protect the downside.

So, how well did I play in Fort Lauderdale? I shot over 100 for three straight days. I kept taking one unnecessary risk after another and paid the price in lost confidence and golf balls (probably over three dozen).

At least my luggage was lighter on my trip back.

What about our flight back? Uneventful.

After picking up our luggage in Boston, did we hug and shake hands prior to heading off to our cars? No.

We basically looked at each other and said, “Catch you later,” and we were off on our own.