If you’re a football fan — and even if you aren’t — you are aware that the Super Bowl took place Sunday.
The 2014 game shared many similarities to past Super Bowls in terms of what it took for the two teams to arrive at the championship. Some of these same characteristics apply to successful investors.
Here are a few examples:
• Good offense. Most Super Bowl teams are adept at moving up and down the field and crossing the goal line. And good investors know how to choose investments that can provide the gains they need to keep moving toward their own goals, such as a comfortable retirement. That’s why, at every stage of your life, you will need to own a reasonable percentage of growth-oriented investments, such as stocks and stock-based vehicles.
• Strong defense. Even a good offense usually isn’t enough to vault a team into the Super Bowl, which is why most participants also have strong defenses.
Similarly, the best investors don’t just put all their money in a single type of aggressive instrument and forget about it; they know that a downturn affecting this particular asset class could prove extremely costly.
Instead, they “defend” portfolios by diversifying their holdings among a range of investments: stocks, bonds, government securities, certificates of deposit and so on. And you can do the same. Although diversification can help reduce the impact of volatility on your portfolio, it can’t guarantee a profit or always protect against loss.
• Perseverance. Every team that makes it to the Super Bowl had to overcome some type of adversity — injuries to key players, a difficult schedule, poor weather, playoff games against good opponents, etc.
Successful investors have also had to overcome hurdles, such as bear markets, bad economies, political battles and changing tax laws. Through it all, these investors stay invested, follow a long-term strategy and continue looking for new opportunities — and their perseverance is often rewarded.
You can follow their example by not jumping out of the market when the going looks tough and not overreacting to scary-sounding headlines.
• Good coaching. Super Bowl teams contain many fine players, but they still need coaches who can analyze situations and make the right decisions at the right times.
Smart, experienced investors also benefit from “coaching" — in the form of guidance from financial professionals. It’s not always easy for busy people to study the financial markets, stay current on changing investment-related laws, monitor their own portfolios and make changes as needed.
By working with a financial professional who knows your situation, needs, goals and risk tolerance, you will find it much easier to navigate the increasingly complex investment world.
Joe Faulk is a financial adviser.