Opening Day

Can we learn investment lessons from baseball?

Public Domain. Source: Wikimedia

Yesterday was baseball’s Opening Day across the country. For the first time in 50 years, all the major league teams were scheduled to start their season on the same day. While it seems a little early in New England – there’s still snow on the ground, and Mount Washington is issuing avalanche advisories – the weather is warming up elsewhere, and the arms and bats are warming up, too. And while my favorite teams had mixed results, there are lessons from the ballfield that can resonate with investors.

The most famous analogy comes from Red Sox slugger Ted Williams. He penned a book, The Science of Hitting, where he outlines how he learned to become the last .400 hitter in baseball. Williams divides the strike zone into 77 mini-zones, each the size of a baseball. He assigns an expected batting average to every zone. A fastball down the middle of the plate gets a .450; a curveball low-and-away receives a .230.

Ted Williams, 1949. Public Domain. Source: Wikimedia

Williams didn’t think he could hit every pitch. He waited for one that he thought would be in his sweet spot. And when the fans screamed and called him a bum for just standing and waiting, he ignored them. The first rule of hitting, Williams wrote, is to get a good ball to hit.

Investing is similar. Investors need to know their sweet spot, their area of particular expertise. It might be value investing, it might be turnaround situations, it might be quantitative analysis. Investors need to understand their zone of competence, their sweet spot, and wait for a fat pitch. Unlike baseball, there’s no umpire calling balls and strikes. You don’t get called out for looking. Successful investors wait for the right idea that fits them.

Patience is essential for ballplayers, and it’s critical for investors. If you get out to the ballpark this year, watch and see who’s patient. They just might have a breakout season ahead of them.

Douglas R. Tengdin, CFA

By | 2018-03-30T06:53:57+00:00 March 30th, 2018|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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