What We Can Learn From The Masters

Everytime I watch golf I can’t help but think of how many similarities there are between successful investing and championship level performance on the golf course.

Anyone who’s attempted a round of 18 holes knows how difficult golf can be. The game is a ruthless fight between you and the course. You’re constantly engaged in an uphill battle. It’s uphill because with each hole you have the limited potential to shoot a few under par, but the unlimited risk of shooting way over.

Take a par 3 for example, the best you can do is shoot a hole-in-one. And that rarely happens even for professionals. Yet the worst that can happen is devastating. You could shoot 3 over, 4 over, 5 over, or even 6 over par on that short little par 3. This is what we call negatively skewed risk to reward. We can only shoot under par by so much, but we can shoot over par by an unlimited amount. Poor Jordan Spieth quadruple bogeyed the 12th hole at the Masters this weekend and went on to lose the tournament because of it. He had been in the lead the entire time only to lose in the final few holes. 

Negatively skewed risk/reward is a tough pill to swallow for most of us. A big loss can create a huge dent in our psyche and send us into the dreaded downward spiral of despair. If confidence in investing ability is lost, just like in golf, that will only open us up to further losses through sloppy decision making. This feedback loops continues until we quit the game. The most important thing for an investor is to have the ability to stay the course in the face of adversity. Golfers do this by learning how to mentally bounce back after a big loss.

As investors we’re lucky because we have the ability to escape the horrors of dealing with a negatively skewed risk to reward ratio on our decisions. By cutting losers and letting winners run, we can set ourselves up to survive the long haul, both financially and emotionally. We don’t have to deal with the emotional turmoil of digging ourselves out of a huge hole — a hole that could take years to recover from.

But we can still learn how to approach a period of sub-par performance from the golf pros. Even if we control our losses relative to our wins, investors, like golfers, will face trying times. It’s important to have a process or set of rules in place that you can turn to when the going gets tough. A pro golfer has a very specific routine he uses before each shot to place him into the correct mental state. At Macro Ops, we have rules and systems to “meta-manage” every decision we make. This keeps emotions out and sound process in.

The Masters tournament this past weekend reminded me more than ever that you’re only as good as your last trade. If you don’t stay discipline at all times, your worst loss is most certainly ahead of you.

 

 

risk management

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Brandon Beylo

Value Investor

Brandon has been a professional investor focusing on value for over 13 years, spending his time in small to micro-cap companies, spin-offs, SPACs, and deep value liquidation situations. Over time, he’s developed a deeper understanding for what deep-value investing actually means, and refined his philosophy to include any business trading at a wild discount to what he thinks its worth in 3-5 years.

Brandon has a tenacious passion for investing, broad-based learning, and business. He previously worked for several leading investment firms before joining the team at Macro Ops. He lives by the famous Munger mantra of trying to get a little smarter each day.

AK

Investing & Personal Finance

AK is the founder of Macro Ops and the host of Fallible.

He started out in corporate economics for a Fortune 50 company before moving to a long/short equity investment firm.

With Macro Ops focused primarily on institutional clients, AK moved to servicing new investors just starting their journey. He takes the professional research and education produced at Macro Ops and breaks it down for beginners. The goal is to help clients find the best solution for their investing needs through effective education.

Tyler Kling

Volatility & Options Trader

Former trade desk manager at $100+ million family office where he oversaw multiple traders and helped develop cutting edge quantitative strategies in the derivatives market.

He worked as a consultant to the family office’s in-house fund of funds in the areas of portfolio manager evaluation and capital allocation.

Certified in Quantitative Finance from the Fitch Learning Center in London, England where he studied under famous quants such as Paul Wilmott.

Alex Barrow

Macro Trader

Founder and head macro trader at Macro Ops. Alex joined the US Marine Corps on his 18th birthday just one month after the 9/11 terrorist attacks. He subsequently spent a decade in the military. Serving in various capacities from scout sniper to interrogator and counterintelligence specialist. Following his military service, he worked as a contract intelligence professional for a number of US agencies (from the DIA to FBI) with a focus on counterintelligence and terrorist financing. He also spent time consulting for a tech company that specialized in building analytic software for finance and intelligence analysis.

After leaving the field of intelligence he went to work at a global macro hedge fund. He’s been professionally involved in markets since 2005, has consulted with a number of the leading names in the hedge fund space, and now manages his own family office while running Macro Ops. He’s published over 300 white papers on complex financial and macroeconomic topics, writes regularly about investment/market trends, and frequently speaks at conferences on trading and investing.

Macro Ops is a market research firm geared toward professional and experienced retail traders and investors. Macro Ops’ research has been featured in Forbes, Marketwatch, Business Insider, and Real Vision as well as a number of other leading publications.

You can find out more about Alex on his LinkedIn account here and also find him on Twitter where he frequently shares his market research.