Why Great Investors Think like a Tennis Player (3 Financial Planning Strategies)

Why do great investors think like tennis players? In this episode of Friends Talk Financial Planning, Bridget proposes three similarities between successful tennis players and successful investors. From using the resources available to taking risks to mastering the mental game, there are ways that you can learn to succeed in tennis and finance. Whether you are an avid tennis fan or not, don’t miss this advice!

Resources:

- Alliance of Comprehensive Planners: https://www.acplanners.org

- John's firm website: https://www.trinfin.com

- Find us on Facebook: https://www.facebook.com/friendstalkfinancialplanning

TRANSCRIPT:

John: We need to be aware of what's going on with interest rates or taxes or all those sorts of things. But what we do about it can be and should be separate. We know what the steps to success are in financial planning, and you need to take those steps, just like in tennis.

Bridget: John, let's talk about how personal finance and money are similar to my favorite sport right now, which is tennis. And I'm going to give us three topics of how money is like tennis. All right, here we go. First, how you handle it when you're young and when you're old. So you've got positives on both sides. When you're young, you can play tennis almost every day. You can play five times a week.

So with that muscle repetition you've got more energy, and you can play a lot, which gives you a big advantage. When you're older, you're not going to be able to play every day of the week. I can really only play three times a week without getting injured. So that means that I got to be smarter if I'm trying to improve. But luckily, I've got some resources, some cash resources, and I know, oh, the way to do it then is to hire a coach and try to get one day a week or one day a month maybe, hitting with my coach, to try to get better faster.

And I think that's a lot like money, because when you're younger, you can work a lot and you can make a lot, but when you're older, hopefully you've got some more resources, you can be smart about it, and you take advantage of that. There’re things to take advantage of in both scenarios. What are your thoughts?

John: Yeah. Well, my first thought was when you talked about playing five days a week at my age, I'm thought, “Oh, that sounds painful.” So I'm glad to hear that it's not just me who’s thinking about that. What was that? Work smarter, not harder, sort of a thing. And I really enjoy this analogy because I was thinking about how when you're young, you can just sort of get better by brute force.

Bridget: Right.

John: You can just work and work and work and get to a certain level. For us amateurs, you get pretty good if you practice six days a week. And that reminds me. You mentioned you can make more money and do things, but my mind went to the sort of building blocks of financial success. Save money and save on a consistent basis.

And you don't have to be really fancy, if you just save and save and save. 401(k)s are a great place. Or even just sticking money in the bank. It's just sort of brute force. If you save enough money, you're going to be financially successful. It doesn't have to be super fancy. In my mind, that is related to the tennis thing.

Can you do some better things? Yep. But you know what? Nothing's a substitute for being on the court six days a week. Just like nothing's a substitute for packing money into your 401(k) plan. And then you get to the other side. Alright, you know what? I can't just brute force this thing in my tennis game, but I'm in a position where I can be a little bit smarter. I can use more of the intellectual parts than the physical side, perhaps.

John: And that's where I related that to the financial planning. When you get to a certain spot, little tweaks make a much bigger difference. If you can improve, whether it's taxes or investment returns or other things, by 1%, and now at this stage, you've got a million dollars, that's big money.

When you had $50,000, you can make that same incremental tweak, and it just doesn't move the needle as far. And so that sort of yin and yang of things. There’re different seasons for your tennis game and different seasons for what can make you successful from a financial standpoint. I just love that.

Bridget: I got another way, too, that tennis is like money. And that is, you probably act differently and have different strategies when you're ahead. So let's say you're behind and you feel like you don't have enough money, or you haven't saved enough for retirement. Then you might decide to be a little more aggressive because you feel like you're behind. I need to take advantage.

I want to put more energy into this, and I want to try to get some points fast. Okay, so you might do a side hustle just for a month. But you're figuring it out, again, because you feel like you're behind, you're going to have a little more aggressive strategy. If you're ahead, you can just be very strategic and try to take safer shots and only take aggressive shots when it's really well set up for me.

But just be patient. I can rely on patience a lot more, and then I can be more successful and let the other person make mistakes. And you don't have to wait for other people to make mistakes when you're with your own finances, because it's really more just about you. You don't have that opponent, but you still have this idea of I'm behind or I'm ahead.

John: No, I think that really resonates. As I think about some of the client work that we do, when you've won the game, when you're ahead, it really becomes defensive. You can choose to go on offense from a financial planning standpoint, but the idea is how do we not lose now. And playing not to lose in sports isn't a great thing, but in money, in your financial life, it can be a great thing. How do you just keep what you've got?

And then on the other hand, maybe you've gotten behind on things, you have to force the hand a little bit. Hey, I'm behind. I've got to take some chances on the court and try to hit some corners opposed to just hitting the ball in the middle of the court. And I’m thinking about some of the wonky, statistical things that we do for folks, but it really comes out when somebody's won the game. Whether you’re more aggressive, less aggressive, it doesn't change the result a whole lot.

You've kind of won. And it's a matter of being smart and looking at maybe your other goals. If you're behind in tennis and you play it safe, you're on a losing track, so you have to take some chances. There are some folks who get in a spot where we have to take some chances to get to those goals that we have. So it just really correlates.

Bridget: When you're behind, you got to try to figure out something. Sometimes it's just you and you need to focus more, but other times you got to try something else. The last way money and tennis are the same is that it's so much about mental game.

So tennis is cool because it was really one of the first sports to focus on mental game.

There's a well-known book called The Inner Game of Tennis that people use for everything from conducting symphonies to playing tennis. And people still read it, and that was written ages ago. And there's also Winning Ugly. I'm just taking a look at that, and it’s an interesting concept. You don't have to be glamorous to win. You just have to do the things that help you win. You can win ugly.

John: Right.

Bridget: So in tennis, it's well known that you need some help with your mental game. And staying positive and present are the keys. And so, the big stars almost inevitably have at least one mental coach on their inner entourage. And when you look at a doubles match, you're constantly seeing the people affirm each after they lose a point. They're patting each other in the butt or whispering to each other.

They're trying to keep the other person positive, because letting your mental attitude go down the tubes doesn't help anything. So the mental game is really important in tennis. But it's also important to stay present and positive with money, you can think, “Oh, woe is me! The future is so gloomy! I can't believe it.” But if you actually look around, you’ll see, “Oh, this isn't that bad. I just had a meal, and I got a roof over my head. This is good. I'm okay.”

You can focus on the end of the world and forget that you’re actually okay right now. The present's good. And here’re three positive things that happened today with money.  I balanced my checkbook, and I paid for my credit card, and somebody paid me. Awesome. Great things that happened. So, similar to tennis, stay positive, stay focused. What are your thoughts?

John: Yeah, one of the sports analogies or phrases that I have really liked over the years is control the controllables. And so, when you're on the tennis court, if there’s a bad call or fans interfering or the wind is blowing or whatever—all these things that go on—what can you control? I can control what's in front of me, and that's what you talked about. Hey, focus on the present, stay positive. What happened on the last point literally has no effect on your next point.

It doesn't make any difference unless you got hurt. The fact that you airmailed one or missed or whatever happened, doesn't necessarily affect you if you don't let it. They're independent things. And so much of our financial planning world is, well, we can't control what the Fed's going to do with interest rates or fill in the blank thing. So is it information? Yep. I mean if you lost three points in a row, you need to know that. You need to know where you stand in the point or in the match. But it doesn't necessarily dictate what you do.

So yeah, we need to be aware of what's going on with interest rates or taxes or all those sorts of things. But what we do about it can be and should be completely separate. We know what the steps to success are in financial planning, and you need to take those steps. Just like in tennis, you know what the steps that you need to do to be effective, and you just need to execute those and stay in the moment to use that tennis type analogy. Again, it just completely carries over.

Bridget: Great. So thanks a lot John for helping me talk through how my favorite sport is like my favorite job, financial planning. I'm Bridget Sullivan Mermel, and I've got a fee-only financial planning practice in Chicago, Illinois.

John: And I'm John Scherer. I've got a fee-only financial planning practice in Middleton, Wisconsin. Both Bridget and I are taking on new clients. We would love to hear from you. But if you like what you hear on our show, and you'd like to find an advisor that's local to your area, Both Bridget and I are members of the Alliance of Comprehensive Planners. And you can find an advisor in your area that thinks like us by going to acplanners.org.

Bridget: And don't forget to subscribe.

At Sullivan Mermel, Inc., we are fee-only financial planners located in Chicago, Illinois serving clients in Chicago and throughout the nation.  We meet both in-person in our Chicago office and virtually through video conferencing and secure file transfer.