Confidence Is Everything

 

An Olympic Challenge

The 2022 winter olympics just ended with Norway taking the biggest haul of medals. The United States placed fourth - in both the total count and the number of gold medals. China, as the host country, had the highest ratio of gold medals to total medals. It seems their mantra must have been "go big or go home." Sliding down mountains challenges the best athletes to balance the risks and rewards of their sport.

Training

While it is impressive to see our athletes climb the podium to receive their medals, the real secret to their success is hidden behind literally thousands of personal sacrifices. These can take the form of early mornings on the snow, family squabbles over who gets the "middle" seat, or foregone school dances celebrating St. Valentine's Day.

Preparation

We can train our bodies to build endurance, agility, and strength. We can also train our brains to plan, sense, and react to our constantly changing environment. One other aspect of any competition is our equipment. Bobsledders polish their sled runners. Ice skaters wax their uppers. Ski racers sharpen and wax their skis. This type of preparation serves at least two purposes: (1) it helps their equipment perform better and (2) it connects the physical aspect of the sport with the mental aspect of the sport.

Mindset

There is an old saying that the best results come when we race like we train. The idea is to come into the competitive arena as relaxed as possible and to not let the pressure get to us. To flip that idea on its head, perhaps we should train like we race. This translates into creating mindful habits that combine our training with our preparation to visualize ourselves creating the successful outcome. This is a skill you will every ski racer demonstrate before a start.

The Dating Scene

We are fresh off of St. Valentine's Day here near the end of "heart" month. Imagine you have (finally) been talked into a blind date by your best friend who said "there is somebody I want you to meet." Anyone whose has been in this predicament knows that there is a lot at stake: old friendships, new friendships, public embarassment - just name a few emotional risks.

You have heard that "we never get a second chance to make a good first impression." The pressure of meeting someone new requires a fine balance between overconfidence and underconfidence. If we arrive on the scene perceived as overconfident, we may come across as arrogant and insensitive by our new date. Underconfidence is equally fraught with peril since we may get overlooked by - or may not have the courage to approach - our future soulmate.

Clearly, the best tactic is to appear confident and yet humble. Hindsight is always 20/20 and our ability to learn and adapt may be our greatest strength. One of my favorite sayings is "even if we fall flat on our face, it is still forward progress."

Our Delicate Ego

Our delicate ego is both a blessing and a curse when we compete in the investing arena. Our educated brains suggest one course of action and yet our stomachs tell us the opposite tack at any given moment. The balance of risk and reward never had more dire consequences than when markets exhibit large swings in short periods of time.

Bull Market => Genius

During bull markets, we may feel like geniuses. Every move we make builds on our profits and everything we touch seems to turn to gold. A "hot hand" encourages us to look more frequently at our portfolios and place larger "bets" each time we roll our proverbial dice. We can do no wrong - until the music stops.

Bear Market => Idiot

The investing arena during a bear market may feel more like a rainy day at The Coliseum or a long game of musical chairs. The “best” case scenario is that we mimic a deer in the headlights and halt all investment actions until the oncoming traffic narrowly misses our rapidly beating heart. A worse case is that we try to guess the direction of the car and make moves to avoid a head-on collision. The absolute worst outcome happens when the deer thinks it can give the car a head fake.

Full Market => Braveheart

Successful market timing is said to require three accurate decisions: (1) when to initiate an investment position, (2) when to sell out of the initial position, and (3) when to buy back into the position. The market timer must do this over and over again to generate sustainable profits.

The intellectual challenge is that by the time we develop enough “muscle memory” to get really good at this “sport,” we are either bankrupt or have expired. Our approach is to use a strategic asset allocation process through complete market cycles. The rewards of competition belong to the brave. Trust the process.

Resources

https://en.wikipedia.org/wiki/2022_Winter_Olympics_medal_table

https://www.huffpost.com/entry/10-tips-for-a-successful-blind-date_b_8689370

https://www.investopedia.com/articles/investing/050813/4-behavioral-biases-and-how-avoid-them.asp