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Confessions of a Money Manager: What Tiger and Rocco can teach us about investing

Ray Unger  —  6/20/2008 10:34 am

I know this is supposed to be a business column, but I couldn't resist tying the Tiger-Rocco U.S. Open playoff to an investment theme. After all, this playoff will certainly go down as one for the ages.

I saw the movie, "The Greatest Game Ever Played," about how amateur Francis Ouimet (pronounced "we-met") defeated England's best -- Harry Varden and Ted Ray -- in a playoff to win the 1913 U.S. Open, and I remember my uncles shaking their heads in disbelief when obscure Jack Fleck beat the titan of his time, Ben Hogan, in a playoff to win the 1955 U. S. Open.

But those events were played before relatively small galleries. This playoff between Tiger Woods and Rocco Mediate was televised to millions of golf aficionados around the world on a course more laden with traps and hazards than a "Jurassic Park" movie set. Only when the match ended -- and Tiger walked off with the trophy -- did any of us collectively heave a sigh of relief.

But we investment manager types should heed the lessons these two contestants taught us about how to deal with difficult challenges. The mental, emotional and psychological battles each faced and overcame was truly inspirational.

First, let's look at Rocco Mediate. He's the quintessential journeyman golf pro with some 20 years under his un-athletic belt and a few but far-distant victories to his credit. What he said before the match, "I'm anxious to see how I perform," spoke to his mental approach to the game. He talked about this often on the Golf Channel. In effect, he said that the Rocco we see being interviewed is a different guy than the Rocco we see playing golf. When he's about to strike a golf ball, he mentally becomes a golfing robot, divorced from his bubbly, outgoing personality. Even Tiger talked about how Rocco changes his demeanor once he sets up to hit a shot.

On the other hand, when Tiger steps onto a golf course he becomes a mental Hulk -- the toughest guy around. When Tiger was growing up his father, Earl, constantly distracted and disrupted his son during practice rounds. He did this to toughen up Tiger's mental hide so he could make his body perform -- and execute difficult golf shots -- under the most stressful of conditions.

It's too bad someone had to lose this match because both played so well under such difficult circumstances. So what did we learn from the Tiger-Rocco playoff? From Rocco, we learned that mental discipline can overcome disadvantage. Despite an unorthodox swing and a not-so-athletic body, Rocco perfected his meager golfing skills and turned himself into a machine that strikes the ball with uncanny consistency and accuracy.

Such achievement means that even amateur investment managers who doesn't have the same educational pedigrees or intellectual skills can compete with professionals. All the amateurs need is an understanding of the basic skills needed to succeed and the mental discipline to hone those skills.

From Tiger, we learn that pressure is not something you learn to deal with when things suddenly turn difficult. Newcomers to pressure seldom understand how such extremes can materially alter an athlete's physical and mental capabilities. Likewise, investors who are new to bear markets seldom understand how differently they might perform when conditions turn negative. It's as if they're different people. Afterward, they wonder what they did, and why they did it. Bear markets, like pressure golf, are something we must train and prepare for.

The lessons Tiger and Rocco taught us about investing? Number one: Prepare mentally for tough times. In doing so we must prepare our portfolios for bear markets. Tiger doesn't say, "What should I do now that I'm in the trees?" He says, "I've been here before. I'm prepared. I know what to do."

Rocco teaches us that we don't have to be like someone else to succeed. We shouldn't try to be like hedge fund managers, buying and selling anything that moves or looks interesting. Instead, we should methodically and rigorously apply those timeless investment basics that we talk about so often. It takes mental discipline to avoid the siren songs of newfangled trading strategies, but like Rocco's robotic swing, it produces better results.

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

Ray Unger  —  6/20/2008 10:34 am