Have you ever spent a day at the race track? Even if you didn’t place a bet, every twenty-five minutes there is an approximate two-minute race full of emotional highs and lows. There are winners and losers, but almost everyone goes home at the end of the day feeling like it’s been a fun day.
Recently there was a lot of excitement with the potential of a Triple Crown winner. Many of the experts watching the big race thought it was the jockey’s strategy that caused the horse to lose the race and the Triple Crown.
At this point you are probably wondering “What does a horse race and a jockey have to do with investing or the path to wealth? What is the connection?”
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Growing up in Arlington Heights (as I did), there were many trips to the beautiful and exciting Arlington Park. In the 1990s, the track was fortunate enough to have both Pat Day and Early Fires as jockeys frequently racing there.
According to the National Museum of Racing, Pat Day won 21.3 percent of his races, while Early Fires won 14.4 percent of his races. This is a distinct dominance on the turf. If either of them were mounted on a horse, you probably had to place a bet on that horse no matter what the odds.
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Have you figured out the connection yet? Investing in the stock market is very similar to betting on horses, because you can never really know who is going to be the big winner. When betting on the horses, you often have a better chance of winning betting on a successful jockey.
With investing, you often have a better chance of succeeding in the long run when you choose an investment that has a great leader with a proven track record.
If you read books about Warren Buffett, you will notice that he makes his investment choices by first knowing all of the details on the company he is considering as an investment. He then focuses on the strength, vision, and character of the executives of the companies he is studying.
A great horse can win a race with an average jockey when racing horses of lesser quality and skills. A great jockey with better vision, strategy, and knowledge doesn’t guarantee success, but does give you a better chance of winning in the race.
With investing, it’s the same thing. You can have a great product or concept to sell; bad leadership however, could destroy that company or mutual fund such as happened to Enron and WorldCom.
Would you be willing to have Warren Buffett invest your money? Would you have Jack Welch of General Electric or Steven Jobs of Apple run a company you’ve invested in? Are there mutual fund companies out there with a longer-term winning record because of solid leadership that you ought to consider?Experts writing the programs and racing forms and the experts on T.V. really don’t know which horse is going to win when making predictions. It is the same with investing, mainly because of a lack of information. However, by analyzing every bit of available information and by picking a leader with a proven track record, you have a much better chance of long-term investing success.
When some people bet on a horse, they do so based on the name of the horse or their favorite number, and occasionally they even win a few bucks. Many investors invest in a stock, bond, or mutual fund in a similar way--because of the name.
Do you know anyone like that? If they made some money, was it luck or because the market as a whole went up? What happens when the market as a whole turns the other way? What happens when a great company promotes a bad leader? Is picking an investment out of the blue a smart idea?
Increase your chances for investment success by looking for great leaders of companies or mutual funds. While this is certainly not a guarantee of success, it definitely can help. Always remember that past performance does not indicate continued success!
Losing a few bucks at the track betting on a long shot is quite different than losing your life savings! When investing your savings, increase your chances by making a safer bet and look for a great jockey. So, off to the track, and good luck!
John Gotschall, CLU, is president and founder of Des Plaines-based Coaching Financial Concepts, Inc. The company provides both offensive and defensive financial strategies for families and businesses with an emphasis on educating its clients. He can be reached either by phone at (847) 813-5511 or by e-mail at coachfinancial@aol.com. John is a registered representative for securities. Securities offered through: The Leaders Group, Inc., Member FINRA/SIPC, 26 W. Dry Creek Circle, Ste. 575, Littleton, CO 80120, (303) 797-9080.
