In the mid-90’s, Richard Williams was something of a joke in tennis circles. This was not because he had pulled his obviously-talented daughters, Venus and Serena, out of the Shreveport Tennis Academy to coach them himself. A lot of tennis parents did that. Nor was it so much because he was a black man trying to make champions out of his daughters at a time when tennis was a very ‘white’ sport. It was because he was not allowing them to play in age-level tournaments.
The normal career progression in tennis used to be for children to start playing around the age of 9 or younger and start playing in under-11, under 14 etc tournaments as soon as possible to get an idea of their mettle and what was working for them and what was not. Richard Williams’ stand was that playing against age-limited opposition taught his charges nothing, and put pressure on them to ‘win’ rather than develop their game to be the best could be.
Twenty years later, with his daughters having won a jaw-dropping thirty Grand Slam singles titles between them, he is hailed as a tennis visionary who correctly put the long-term development of his daughters as tennis players before the temptation of lower-level tournament wins and prize money.
Too often, we fail to see the benefits of this strategy in our investments, or even in our lives. Going for a professional or post-graduate degree has significant long-term career benefits, but many still choose to look for jobs immediately after graduation. Understanding an issue in-depth has advantages over merely adding your voice to an indignant furore, but few choose to do so.
In investing terms, this applies to the way we build our portfolios.
Investing in a stock or sector for ‘short-term’ growth is not only risky, in that there is a strong possibility of a decline in the stock, but as any tax advisor will tell you, short-term capital gains are taxed at a very high rate. Apart from this, they carry another important caveat – in order to have any chance of actually making profits through day-trading, you need to pay it a lot of attention, and – this is critical – you still cannot accurate predict that you will make good money from it.
Indeed, this infatuation with short-term returns is counter-productive. We spend our time worrying about whether the Market indices are too high, or too low and end up not investing at all. “The market is too high, no point putting in money now,” says one advisor. “The market is too low, who knows when it will recover now?” says another. Both approaches are unhelpful. The ‘market’ is what it is. It rises and falls due to factors ranging from pure emotion to global politics, but the underlying strength or weakness of it depends on the economy, both at a country level and a global level. Over a period of time, you need to be able to accomplish a return that exceeds the inflation rate by a healthy amount.
Unless you have access to massive resources and the ability to invest as a venture capitalist in a business at the very early stages, making more than 14% to 20% over a period of five to six years is unrealistic. Rather, focus your energy and your money on calculated risk-taking, balancing your portfolio through equity and debt, and using monthly SIP’s to ensure your saving habit is not compromised. Trying too hard to catch the ‘next big thing’, and moving money out of existing investments to latch on to a sectoral trend might pay off once or twice but making it a habit is asking for trouble.
Do not forget that it is money that needs to work for you, rather than you working to make something of your money.
In conclusion, keep in mind another fact from the remarkable career of the Williams sisters – where other players were playing as many as twenty and more tournaments a year, exhausting themselves to accumulate ranking points (and money) in the hope of reaching the number 1 ranking, Serena Williams routinely played only the four Grand Slams and about four to six more tournaments. The point was that she won almost all of them, and maintained her supremacy over a period of twenty years, while women who started their careers after her crashed and burned their bodies and minds unable to take the grind of playing tennis week after week.
Focus on the long-term. Think about what you could achieve if you are steadfast to your goals for twenty years, rather than two weeks. You won’t regret it.
