Investing Successfully: What We Can Learn from Roger Federer
Have you ever wondered what sets Roger Federer apart from his opponents? Perhaps you have even experienced it yourself. At the end of the tournament, it is often not the player with the most aces who wins, but the one who stays in the game the longest, which is not the same thing.
The ultimate goal is to prevent mistakes. Perseverance is what counts. For instance, why is it that no African soccer team has ever won the World Cup? Perhaps because their enthusiasm means they often play too aggressively. Even though it looks good, it is no match for the way world champions persevere by playing a compact game that avoids mistakes. There is a lesson we can learn from this simple secret to success of playing defensively: Winners just make fewer mistakes.
What Does This Mean for the Art of Investing?
It's quite simple. Successful investors do not have to come up with a new idea every single day. Nor do they need to have the best equities. Their simple recipe for success lies in a disciplined process. A tough process highlighting the strengths of an investor will allow you to persevere more than incessantly looking for new ideas will.
Success is typically found through disciplined work that also adapts to try to prevent mistakes as much as possible. This requires strength of mind. After all, it is only natural to have setbacks – when investing, in sports, and in life. The people who grow from them are the ones who succeed.
Performance of Credit Suisse mandate solutions versus the competition
| CHF | EUR | USD | |||||||||
| 2014 | 2015 | 2016 | 2014 | 2015 | 2016 | 2014 | 2015 | 2016 | |||
| Income | +284 | -113 | +118 | +231 | +219 | +160 | +109 | -13 | +160 | ||
| Balanced | +77 |
-111 | +114 | +129 | +152 | +354 | +24 | +18 |
+301 |
||
| Capital Gains | +63 | -120 | +81 | +63 | +110 | +494 | -22 | -3 | +408 | ||
| Equities | +16 | -38 | +31 | +129 | +141 | +602 | -188 | +62 | +513 | ||
Over- and under-performance of Credit Suisse mandate solutions versus the competition (in basis points)
Source: PCI Asset Risk Consultants (ARC) Report, Credit Suisse
Using Tenets of Sports to Invest Money Successfully
The added value of a controlled investment process is illustrated through analysis. Discipline, skills, creativity, and adaptability are key success factors that are used to hit the mother lode in both sports and investing. The subtle difference between playing the game and winning can be found in this simple secret.
Similar cases can also be found in portfolios that are managed only rarely or managed without a clear process. Consider, for instance, a recent anonymized analysis of the historic risk/return ratio of several thousand client portfolios. As seen in the figure below, only 5% of the portfolios outperformed strategic asset allocation (SAA). Considerably higher risk was seen in 77% of portfolios, and 60% of portfolios performed significantly worse.
The added value of strategic asset allocation (SAA)
(1) SAA-based Private Mandate All Instruments portfolio: optimized risk / return; Note: Return and risk difference shows the difference between the individual client performance compared to a Private Mandate All Instruments with same “IST” risk profile. Return and standard deviation (both annualized) are based on a 3 years time horizon (30.06.2013 – 31.05.2016). Graph is based on 4’492 IPC clients
Risk/return profiles of several thousand anonymized client portfolios versus strategic asset allocation (SAA)
Source: Credit Suisse
