Back in 1998 when Mark McGwire and Sammy Sosa were chasing the single season record for home runs set by Roger Maris, everyone was hyped up on home runs, so much so that a commercial came out featuring pitchers Greg Maddux and Tom Glavine talking about how “chicks dig the longball”. I’ve linked to the commercial below if you feel like taking a walk down memory lane.
Chicks Dig The Longball
Chicks Don’t Dig The Longball
While chicks dig the longball in baseball, when it comes to investing, chicks don’t dig the longball. They dig “small ball”. If you aren’t familiar with these baseball terms, fear not. The longball is simply a home run. It’s one of the great plays during a baseball game because of how far the ball needs to be hit and for the fact that you get at least one run out of it, more if men are on base.
Small ball on the other hand, is the complete opposite. Small ball entails having the first batter get on base, then having the next batter bunt or “sacrifice” himself to get the runner over to second base. At this point, the runner on second is considered to be in scoring position. From there, the next batter attempts to move the runner over to third base or even score him. If the runner gets to third base with less than two outs, you can be sure that the batter is going to try to hit a fly ball to the outfield so the runner can tag up and score a run.
Watching small ball is nowhere near as instantly exciting as a home run, but it is great to watch, at least to me. Watching teams manufacture runs is certainly an art form. Few teams play this way currently. Most try to get a few guys on base and then hit a home run.
Men Are From Mars…..
So what does any of this have to do with personal finance? It has everything to do with investing. See, men dig the longball when it comes to investing. They want to buy a stock for $10 and sell it at $400 and brag to their friends while they light their cigar with a rolled up $100 bill that is on fire. For many men, we can’t help it, this is just how we are wired.
This gets us into trouble. We tend to trade much more frequently. Trading costs money, so the more we trade, the more our costs go up. This eats into any profit we may make. All of this jumping around also hurts our returns. Since no one can time the market, there are going to be times during our frantic trading session when we are out of the market. All of this leads to the average investor earning just 2%.
…..Women Are From Venus
Women on the other hand, dig small ball when it comes to investing. Women tend to pick an investment and stick with it. Small ball is tedious and time consuming. If you aren’t a fan of baseball, it most likely is boring to you. But it works. The same thing applies when investing for the long term. Studies show that women take less risk when it comes to investing and along with that lower risk, they tend to stay invested for longer periods of time. All of this adds up to being more successful when it comes to investing.
Regardless if you are a man or a woman, there are a few key takeaways from this:
First, pick low-cost investments. Just like trading eats into profit, so do management fees. The more you can lower these, the better off you will be. If you have no clue how much your investments are costing, you, sign up for a free Personal Capital account and see for yourself in minutes.
Second, stay invested. You can’t time the market. No one knows what is going to happen, so there is no point in trying to guess.
Third, understand that over the short-term, the market is going to be choppy. It might be up 20 points today, down 150 tomorrow and then up 50 the next day. Don’t focus on the day-to-day action. Focus on the long-term. That is why you are investing after all, for the long-term. If you are investing for short periods of time and cannot afford to lose your money, the stock market is not the place for it. If you are investing for the long-term and are scared, here is a suggestion for how to invest when you are scared of the stock market.
Finally, related to the above point, the day-to-day movements of the market can be rough. But the long-term trend of the market is up. Focus on that, that over the long-term, you will come out ahead.