The World Cup is well underway in Qatar, with 32 of the world’s elite football teams going head-to-head, all with a dream of lifting the famous trophy.
Many consider winning the World Cup to be the peak of any footballer’s career. Such an achievement requires incredible individual talent, the perfect blend of attack and defence in a team, and a whole host of luck along the way.
Coaches need to have a clear strategy of how they want to tackle the tournament, with a detailed understanding of the team’s strengths, weaknesses and possible scenarios ahead.
In the financial markets, we need to take a similar approach. We need to know what we can handle personally, make good decisions at the right time, and have a flexible long-term strategy for the many challenges and obstacles ahead.
I’ve broken down 10 key lessons we can learn from the World Cup to take back to our investing strategies.
Some may be relevant to you, and some you may think you’ve already conquered, but as a good investor, being open to new lessons is essential, and can be a whole lot less expensive than learning from your own future mistakes!
Let’s get started…
Lesson 1- Balance your Team
We’ve all seen sports teams who can blow away a team, but when the tables turn, totally crumble in defence. Your portfolio is no different!
When times are good, and sentiment is positive, almost anything will make you money in the stock market. But when the drawbridge comes up, and the market suddenly becomes a scary place to be, if all your holdings are in profitless tech companies, you’re going to be in trouble.
Instead, holding a diverse range of companies, who will continue to perform whether the market is in rally mode or not is the only real solution.
Sure, you might miss out on some of the insanity when the market is in peak rally, but by missing out on the inevitable collapse when the tide goes out, you’ll save yourself a lot of stress, and probably a good amount of money too.
Lesson 2- Hard Work Often Beats Talent
Can you name a single player from the 2014 Costa Rica team which made it to the 1/4 Finals of the World Cup?
Sometimes hard work and determination beats the natural talent at an individual level. If you’re willing to put in the work, and scope out great companies, then it doesn’t matter if you don’t have the same tools and resources that the big guys have in the market, you can win big!
I look to use affordable tools such as Unusual Whales and SimplyWallSt to get an edge in the market.
Lesson 3- Expect the Unexpected
No day in the market goes entirely as expected. Company reports, breaking news, or an Elon Musk Tweet can blindside the entire financial world, and send us into a freefall, or inspire new investors almost instantly.
Being aware of this and having a plan for how to cope is an essential part of investing in 2022.
Giving yourself the chance to recover when the worst happens, and having the mental resilience to get back up again following a surprise loss (see below..) is one of the most difficult blockers to being a good investor.
But if you can ride out the worst times in the market, you usually find that to be the most lucrative!
Lesson 4- Take Risks at the Right Time
Showboating in the final minutes of the World Cup Final at 1-1 makes little sense, so why would you take risks when financial conditions are just as tense?
There’s nothing wrong with taking a risk here and there, but if your entire portfolio is regularly going all in on a single company with poor fundamentals, sooner or later you’re going to blow it.
Instead, save a small percentage of your portfolio, maybe even in a different brokerage, and treat it as your risky account, totally separate from your safer, well balanced, portfolio.
Lesson 5- Patience is Key
You’re very unlikely to become a millionaire overnight in the market.
Sure, you might get lucky with options trading, or a niche cryptocurrency, but far more people lose than win in these situations.
Just like you can’t win the World Cup in Game 1, patience is key. Instead, be conscious of not losing just as much as winning, and let your money do the heavy work over a period of decades, and you’ll look back fondly.
Lesson 6- Always Have a Backup Plan
Brazil 2014, a nation’s entire dreams rest on the shoulders of one player. But in the 1/4 finals against Colombia, Neymar is ruled out of the tournament with a back injury.
Without a quality replacement, Brazil limped to a heavy defeat against Germany in the next round.
Let’s compare this to a poorly diversified portfolio. If your star holding suddenly has a bad year, your entire financial world could quickly sour.
Having a diverse range of sectors, market exposure, currency risk, asset class, and company size is far more likely to result in a safer and more stable portfolio.
Lesson 7- History ≠ Future
You’ll see the statement; “Historical performance is no guarantee of future results” all the time in the financial world.
This is usually used to protect those giving financial advice from problems should things go wrong, but it’s a critical point to consider when trying to find lucrative investments.
Sure, Apple and Tesla have performed really well for investors in the last decade, but when recessions roll around, they usually herald the dawn of a new range of companies which will make headlines and portfolios shine in the future.
If you can keep a close eye on emerging areas, and find the gems, you’ll be in a far better position than just following the top 5 Mega-cap companies we hear about every day.
Of course, knowing who this is, and when they will succeed, is the challenge. Maybe this is the year Serbia or USA raise a few eyebrows in the competition?
Lesson 8- Never Believe the Hype
We’re all prone to getting a little carried away when we hear about the next big thing. Whether it’s an up-and-coming company promising to disrupt the industry, and innovate it’s way to the future, or just the nation’s football team, it’s always best to keep our feet on the ground.
Investing in innovation isn’t always a bad thing, but knowing how it works within the context of the economy is critical. Nobody really wants to own speculative companies working in genetics when a recession is looming, with consumers and investors generally instead focussing on basic goods and retail.
Lesson 9- Be Flexible to Change
If you’re Dutch, a goalkeeper, or a World Cup fan, you probably remember the 120th minute substitution in the 1/4 Final of 2014, where Tim Krul replaced starting goalkeeper Jasper Cillessen.
Many fans were shocked and surprised by this strange move, but with penalties looking likely, manager Van Gaal opted for the more experienced goalkeeper with an extra 2 inches of arm reach.
Of course, had they lost the shootout, which they eventually won 4-3 thanks to 2 saves from Krul, the manager would have been labelled a fool, but by having a flexible approach, and a new strategy in the event of a penalty shootout, Louis Van Gaal was widely given credit for such a bold move.
Lesson 10- The Right Coach Matters
And finally, all of this comes from either learning by yourself, or by following the right influences.
Of course, having an Investment Coach is one of the fastest ways you can get your money working, but there are a whole host of great contributors providing their insights to the complicated world of investing.
Always be sure to have a range of sources. The loudest voices and the flashiest presentations aren’t always right, as we saw with the legendary Diego Maradona’s volatile tenure as Argentina manager.
Conclusion
So we’ve reached the end of our 10 lessons, and without doubt there are some great lessons to take from the action we see on the pitch in this year’s World Cup.
But whether your team is going to eventually win, or is already on the plane home, we always know the next competition is just around the corner. So whether you learn these points now, or need to wait for another opportunity, staying open to learning in the stock market will always be a winning attitude.
Best of luck in the rest of the tournament, and don’t forget to get involved in the Investing World Cup, deciding which company deserves the highest honour the Oak Investor Community can bestow.
Great blog again Gordon. Really insightful !