06 August 2023

On Golf, Life, and Investing

By Matthew McKee, CFA, CFP®

August 6, 2023

On Golf, Life, and Investing

Like many others, I see golf as a reflection of life. It’s taught me patience, perseverance, strategy, and most often, humility.

It’s a way to bond with family and friends and stay active outdoors. I’ve spent countless weekend mornings with my brothers and dad making the six-mile trek around the course, and afterward celebrating the great shots and lamenting the missed opportunities.

A few weeks ago, my three brothers, our dad, and I had a once-in-a-lifetime trip to Scotland. You wouldn’t believe it (or maybe you would) – the airline lost my clubs and my dad’s on the flight out.

Ahead of us lay eight days of golf at some of the oldest and most revered courses in the world – and all we had were the clothes on our backs. I wouldn’t see my clubs again until a week after we returned home.

We made our way around St. Andrew’s, Carnoustie, and several others with the rental sets as best we could. But renting was very costly and, as the golfers among you know, wasn’t the same as playing with our own sticks.

Golf has analogies to the wealth work we do with our clients. Both are about process, managing emotions and risk, and balance.

1.      Process is controllable, while outcomes often aren’t

As a child, my father would tell me to “play the hole backward” – meaning, start from where you want to end up and work your way back. Our clients often first come to us wondering what to do next with the many moving parts in their wealth picture.

They usually haven’t spent enough time answering for themselves what the ideally designed life would look like. On the golf course, the end state is clear – get the ball in the hole. It takes some vision and self-awareness to figure out what that means in our lives. “Retirement by 65” is not a good enough answer.

In working backward, we think about the troubles and opportunities along the way. We think about what might get us off course, where the safe shots might be, and what we are capable of with the tools at our disposal.

And each shot has a process of its own, just as each aspect of a wealth plan has its key executional particularities. Our investment process provides this routine and a framework for the decisions we make on behalf of our clients.

A process-oriented routine helps prevent emotions from driving decisions and keeps us from trying to control things we can’t. Better outcomes usually flow.

2.      Keeping emotions and risk in check:

Not every shot ends up exactly the way we’d like.

Even the best golfers make poor shots, but they know that keeping their emotions in check and focusing on process (see #1) is the only way to react.

They also know how to “miss in the right place”.

We might do all the right things in our investment plan, and still miss opportunities that we wish we could get back. But, as in golf, we must “play it as it lies” and focus on the next shot at hand.

Like a good caddy, we help our clients understand the tradeoff between risk and return in every facet of their wealth game.

In our last newsletter, we focused on reducing investment risk in concentrated stock positions.

Concentrated stock positions are like the hero shot in golf.

Say you’ve hit a good drive, sitting pretty in the middle of the fairway. A 7-iron away lies the center of the green. A 6-iron away sits the flagstick, tucked into the back corner of the green, guarded by bunkers.

There is no right or wrong approach – just the one that best aligns with the player’s current circumstances. This requires a rational assessment of the relative risks and rewards of playing it safe versus birdie-or-bust.

Your concentrated stock might wind up the next Apple or Amazon. Or it will underperform a diversified portfolio that has much less risk.

There are also intolerable risks you should insure against. Clubbing down might be insurance against missing long.

At Target Rock, we work with many physicians. Far too often, we have clients come to us without the right type of insurance or the wrong amount of coverage.

We’ve seen surgeons who don’t have “own occupation disability”. If they suffer a disability that limits their ability to operate, but they could still ring up groceries, their insurance wouldn’t pay out. They’d just be told to get another job.

To be clear, as a fee-only registered investment advisor, we don’t sell insurance. But we do help analyze the “what-if” scenarios and determine how to size and source insurance coverage appropriately.

3. Maximizing enjoyment while minimizing your scores:

Both golf and life are about balance. It’s not just about maximizing your returns or building the most wealth possible or shooting the lowest score. The name of the game is to constantly improve and minimize regret.

Wealth and golf are about making the most of our time and resources. It’s about taking that six-mile walk with my father and brothers, knowing that all resources, especially time, are finite.

How do we use our finite resources to live our most fulfilling life? This is the fundamental question we consistently ask as we help our clients point their wealth toward its highest purpose.

Back to my recent Scottland trip – a lesson I learned.

I’ve always scoffed at travel insurance. As an analytical and quantitative person, I would estimate the probability of lost baggage, the cost of replacing the items, and calculate some back-of-the-envelope expected return.

Maybe my probability estimate was off, but I certainly didn’t incorporate the value of my time in dealing with the unexpected repercussions of losing my clubs, nor the regret of not having all the tools to play my best.

From now on, I will err even more toward direct flights – and maybe even consider travel insurance – to take that risk off the table.

Come play golf with us.

Adrian and I met on the golf course, and we find it a great place to meet with clients and friends to discuss their personal circumstances. Reach out and let’s set up a tee time!