The US Open, the biggest US tennis tournament and fourth Grand Slam of the year, is finally here. The tournament is held in New York and is the highlight of the summer for many sports fans.
But what does it have to do with investing? When watching the tournament this year, make sure to pay attention to a few important lessons that investors can learn from tennis.
Don’t Be Overconfident
At the last Grand Slam tournament, Wimbledon, we saw Venus Willia ms lose in a shocking upset to 15-year-old Cori Gauff (ranked 313 as opposed to William’s ranking of 44)in the first round. Of course, this was a massive shock to the tennis world.
Why did Venus lose? It’s hard to say but one good guess is overconfidence. In tennis, just like in investing, overconfidence can destroy you. It’s important to do your homework, understand key investing concepts and terms, and make decisions carefully, even if you’re a veteran investor. Sometimes people think “it can’t be that hard” and end up making mistakes with huge consequences. That’s why at Cherries, we try to present important information in an accessible and understandable format to make this learning process as easy as possible.
Measure Your Success at Intervals
In tennis, you have to win several games to become the winner of a match. Your success is measured along the way, starting with games, then sets, and finally matches. If you beat yourself up with every lost game, you won’t be able to reach the finish line.
When investing, it’s important to look at the long term and still measure your success periodically along the way. You’ll be able to see the big picture and how your investments are performing. Instead of constantly watching your investment rise and fall, decide ahead of time on a check-in schedule. That way, you’ll notice if there’s a problem but won’t get caught up in every tiny loss.
Investing = Playing Tennis against the Market
In tennis, there are two ways you can win a match. The first is by hitting “winners”. These are hard shots that will overwhelm your opponent. The other way is to cut down or eliminate unforced errors.
While hitting a winning investment is always fun, we can’t count on the big wins to bring us ultimate success. We can, however, do everything we can to cut down on errors. How? Through analysis, risk calculation, educated decision-making and continuous reevaluation of the financial situation. When we eliminate potential errors, the chances of success are much higher.
Different Strategies are Better for Different People
In tennis, there are four main playing surfaces: grass, clay, hard surface, and carpet (the US Open uses hard surface). Plus, different players have different specialties: backhand, front hand stroke, serves, and more. All of these factors give specific players advantages and disadvantages over their opponents in particular matches.
In investing, there are many different strategies and “playing fields”. You can invest in different stock exchanges, real estate, or other investing channels, choose portfolios with higher or lower levels of risk, invest different amounts, etc. In order to give yourself the best possible chance, you have to take all of these factors into account and ideally, create a diverse portfolio that offers you a balanced chance.
Invest Wisely and Enjoy
The US Open marks the end of the summer and a return to routine for many. It’s the last chance to kick back, get together with your friends, enjoy some snacks, and watch the games! While you’re at it, don’t forget to think about what tennis can teach you about investing. Before you know it, you’ll be back to making wise financial decisions, just like the players on the court.