What can investors learn from sport?

What can investors learn from sport?

I apologise to those of you that do not like sport, the purpose of this post is not to bleat on like some bloke at the pub who is attempting to name his best eleven… again… but to make an observation about the way people behave and in particular what investors can learn from sport.

I wonder if you watched the final of the T20 World Cup at the weekend. It was a thrilling match – (spoiler alter) England were eventually beaten by the West Indies. The “English” team (nationality in sport is debatable) started badly, losing Roy, Hales and Morgan very quickly. At 23 for 3 things looked pretty bad.

These days I delude myself that I can multi-task, so flicked between TV stations, watching football, Grand Prix, the cricket and keeping an eye on the social media (yes it would appear that I’m rather sad and lacking an attention span). However, getting to my point – social media exposes an array of reactions (commentators term them emotions) that people reveal as they experience an event.

Too early to call

Many had written off England with the fall of the third wicket, several used terms like “game over” before the team had even completed their attempt to score as many runs as possible within 20 overs. The game had not even reached its half-way point, but thousands had already conceded victory.

Its not over until its over

The English fortune turned around equally as quickly once the West Indies began to bat, crumbling to 11 for 3 and struggling for runs. Suddenly there was “hope”. Indeed by the end of the 19th over (of 20) another 19 runs were needed, which seemed out of reach for Carlos Brathwaite, the facing West Indies batsman, who had 10 runs to his name. England were in the proverbial “driving seat” and now expected to win. Brathwaite had other ideas and promptly smashed each of the next deliveries for six runs, resulting in a dramatic victory and tournament win. Of course sad and desperate for Ben Stokes, the English bowler.

Investor behaviour is invariably no different from those on social media at the weekend. Reacting too quickly, feeling depressed, exasperated, then gaining some hope , followed by over confidence, followed by…. Repeat.

Your goals, not someone else’s

Investing is not a hobby, it is not a sport (unless you really are very rich). It is no way to learn about yourself and no place for reactive emotions. We approach the end of the 2015/16 tax year tomorrow. The deadline invariably pushes prices up. Whilst I am obviously (I hope) of the view that allowances ought to be used when appropriate, any investing should only be done if it helps you to reach your goals, not those set by HMRC.

Part of my job is to keep clients disciplined, avoiding mistakes and sticking to their own plans (not mine). This has been termed “adviser alpha” and adds an unquantifiable amount of value, though many attempt to quantify this.

The media in all its forms constantly stirs feelings of anxiety or missing out on opportunity. The vast majority of commentary about investing is about as relevant to your financial plan as any sporting event – completely irrelevant! Trying to perfectly time the market (the opportune moment to buy and sell) is frankly impossible to achieve with consistency. In practice few do so and fewer still can demonstrate this as skill rather than luck.

Have a Successful investing experience

Unlike sport, investing does not have to be about “winner takes all”. Everyone can win if they are investing in a way that fulfils their financial planning goals. They key is remaining calm, disciplined and clear about what you are really trying to achieve.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

What can investors learn from sport?2017-01-06T14:39:18+00:00

McLaren Set Pace For Businesses

Businesses can treat fines as deductions

The world of Formula 1 is a rapidly evolving one, however whilst drivers may be awarded penalties for dangerous

driving, rarely is it that they get to go head to head with the taxman.  Financial engineering met elite engineering in the form of Formula 1 and HMRC. You may recall that the F1 McLaren team were fined a couple of seasons ago,(2007) for allegedly spying on their rivals Ferrari, in the hope of gaining a competitive advantage. The governing body (FIA) handed a pit-stopping £66m fine to the McLaren company which became £32m. Well it seems that McLaren are not simply in the business of setting fastest laps, pole positions or GP wins, but have now won a landmark case against HMRC, this is potentially a help to those firms that operate in industries where fines can be imposed. In essence this makes the case that businesses can treat fines as deductions. Frankly the one industry that comes to mind immediately for me is financial services – but also the sports world and perhaps media world.

A statutory penalty cannot be a deduction

McLaren have successfully argued that their fine, is not a statutory penalty, but one under the FIA rules. As a result this could be claimed as a business expense and therefore deductible. HMRC had argued that it wasn’t – on the grounds that a penalty violated someone else’s civil rights and therefore not deductible. The courts ruled in favour of McLaren. HMRC can still appeal (and may do so). So whilst being fined rarely carries good news, it would seem that in such circumstances, at least it can be described as a business expense and therefore used to reduce profit and associated tax. This may provide some comfort to a disappointing season for McLaren, who are currently third in the Constructors Championship with 4 races to go, but little chance of either Jenson Button or Lewis Hamilton winning the Drivers Championship this season.

McLaren Set Pace For Businesses2012-10-18T11:48:45+01:00
Go to Top