Prudent Portfolio: U.S. Tennis Open Reminds Us to Handle the Markets
By Kevin Peters
The U.S. Tennis Open celebrated its 50th anniversary this month as currently constituted, marking a half-century of memorable moments on the courts from Arthur Ashe’s historic win in 1968 as the first African American to be ranked #1 to Andy Murray’s bringing home the crown to Great Britain in 2012.
This year, the U.S. Open marked another notable occasion, offering the most prize money in tennis history: $53 million.
How does the performance of a world-class tennis champion remind me of the savvy investor?
Both must arrive to the game well-prepared; both have their eyes set on the end goal; and both must negotiate a back-and-forth phenomenon that, if not managed correctly, could prevent the player or the investor from succeeding.
In tennis, athletes expect smashes and backspins and moonballs that have them racing from one side of the court to the other. There is little or no gentle volleying in a championship match. In the case of investors, they should expect the same back-and-forth in the markets: swings that keep them on their toes.
That’s the kind of volatile market we’re in now; it keeps lobbing at investors and it is up to us to respond methodically.
In my mind, the stock market remains attractive, although most investors probably would be better off taking a bit less risk than in the recent past. The economy continues to show improvements – a good sign for the stock market. For example, according to a Commerce Department report, the U.S. economy accelerated in the last quarter, with the gross domestic product (total output of goods and services produced in the U.S.) posting its best showing since 2014.
This reminds me of another quality that tennis pros and successful investors share – the ability to stay cool under pressure. Playing the game with little emotion and responding instead from a position of readiness is key to a good outcome. (One notable exception is John McEnroe’s famous tantrum of 1981, for which he was fined. But better to follow the guideline of not allowing emotion to rule the day.)
When it comes to investing, emotion should be kept in abeyance. I’ve seen too many people get emotionally attached to a stock as it goes higher and higher – and then lower and lower. Just as there is a time to buy, there is a time to sell. Emotion should be kept out of the equation.
For investors, readiness means remaining constantly aware of changes in economic conditions and, equally important, staying up to date on the successes and challenges faced by companies represented in their portfolios.
Of course, champion athletes, like investors, rarely reach their lofty goals alone. An entourage of coaches and managers generally accompany tennis stars as they train for their careers, offering their expertise and professional know-how. The same is true of investors. A team approach is best, and that team should include a good tax accountant and a financial adviser, among others, helping you keep your eye on the ball.
Kevin Peters is a financial adviser with the Wealth Management Division of Morgan Stanley in Purchase. He can be reached at 914-225-6680.
The information contained in this column is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Wealth Management, or its affiliates. Morgan Stanley Smith Barney, LLC, member SIPC.
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