Confessions of a Money Manager: Invest like golf pros play golf

Ray Unger  —  5/30/2008 9:02 am

Wednesday was one of those rare days when I both worked and played -- I was invited to participate in the Media-Day Pro-Am of the Aurora Health Care Championship that's currently taking place at the Geneva National Golf Club in Lake Geneva.

The Aurora Health Care Championship is a part of the Duramed FUTURES Tour started by the Ladies Professional Golf Association (LPGA) some 28 years ago. It's affectionately called "The Road to the LPGA and Beyond" because it gives young female golfers from around the world an opportunity to earn a spot on the lucrative and star-studded LPGA tour.

My work consisted of hobnobbing with other media types, and when I mentioned I wrote a financial column they offered comments on the stock market, the fate of our economy, and a few mutual funds. That lasted about a minute when we segued to the really important stuff like: Is the new Nike ball really better than the Titleist Pro V1?

I must admit that there's no better way to spend a day at the "office" than playing golf on a classy course and watching professionals do their thing. I also took my new sports media role seriously by interviewing last year's winner, Swedish-born Sofie Andersson. But let's get right to the meat of the investment lessons learned on a golf course.

* The first hole is just one of 18.

The pros say the first hole is kind of a warm-up. Don't try anything special or heroic. Get the ball in play, on the green and leave with a par. The same applies to investing. Start easy with some low-risk, dividend-paying, big-cap blue chips that put your portfolio into play. That's your par.

* Trouble off the tee.

The pros not only know they're going to get into trouble, they prepare for it. In fact, they spend more time practicing recovery shots around the green, out of the rough, out of sand, etc., than standard drives or iron shots. Likewise, investors should realize that corrections and bear markets are inevitable. If investors think the market's not going to experience ups and downs, they're in for a rude awakening. Diversifying into areas that do well during troubling times is an essential element of long-term investing.

* When to take the medicine

OK, the ball lands in the woods, nestled in the pine needles. Now what? Does the pro try for a miracle shot between narrow tree limbs toward the green? Or does the pro simply pitch out onto the fairway and take the medicine (a bogey) and go to the next tee without a second thought. Investors must come to grips with getting out of trouble as well. When a stock falls because of some disappointment, more often than not it's better to take the medicine (sell) and just move on.

* Simplicity

Believe it or not, golf pros are the quintessential simplifiers. They take incredible pains to reduce unnecessary movement in their swings. They perfect the basics -- nothing fancy, nothing complicated. Investors can sure learn from this principle. Last week I received a phone call from the president of an oil company executive located in Scottsdale, Ariz. He was looking for investors to buy an "asset-backed 11 percent debt instrument with a half-percent royalty kicker with a three-year lock-up." Does that sound complicated? My answer was a simple "no."

* Avoid the "snowman"

The pros know that nothing ruins an 18-hole score like a snowman -- a big fat 8 -- on any hole. So when trouble occurs, they take great pains to avoid disasters. Investors should also take great pains to avoid making big mistakes and taking huge losses.

* The golf tour includes foreign players

The Duramed FUTURES Tour includes rising stars from all over the world. Had you known this, you wouldn't have been surprised by the international contingent now on the current LPGA Tour. The lesson here is that international investments are key to all investment portfolios. Especially having a small exposure to emerging markets. That's where tomorrow's stars will come from.

* Professional advice

My connection to this event came from my golf buddy Marv Turner, the owner of Yellow Dog Productions, a video and multimedia services company that just completed a video shoot with Arnold Palmer. Regarding golf and investments, Turner said: "I can only do so much with my game -- at some point I need professional help." Amen.

Ray Unger is chairman of Forward Investment Advisors in Madison. He can be reached at 833-9400.

Ray Unger  —  5/30/2008 9:02 am