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An Investor’s Worst Enemy

The investor’s chief problem – and even his worst enemy – is likely to be himself. – Benjamin Graham

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If beating the market was as easy as becoming a top tennis player, there would be a lot more Serena Williams and Roger Federers. The lessons of acquiring skill in tennis are crucial for investors to heed.

Like most boys growing up in New York City, I spent much of my childhood and teenage years with a basketball glued to my hand. I was a fairly good athlete and even managed to make my college basketball team as a freshman.

That is not saying much.

Baruch College was a Division III school, and I mostly sat at the end of the bench. By the end of the season, I had accumulated more splinters than minutes played. I also played lots of baseball, softball and football. Unfortunately, since there were not many tennis courts in the Bronx, I did not get to play tennis often.

At the age of 25, I moved to San Francisco. Everyone there played tennis, so I became a tennis player. After a relatively short time, because of my athletic skills, I became a decent weekend player. However, I was often frustrated by the fact that players consistently beat me even though I was the better athlete. It was particularly frustrating when I lost to a player who was decades older.

After about 20 years, I figured it out.

While I was a better athlete, they were better tennis players – and there is a big distinction between the two.

With this “revelation,” I finally decided to attend a tennis clinic. At the end of the week, each of the participants got to play for an hour with the tennis pro. During my session, I learned something that dramatically improved my tennis game. It also provided me with an insight about games in general.

Like most weekend players, my weaker shot was the backhand. During a rally, the tennis pro hit a shot deep into my backhand corner. He then came to the net, putting even more pressure on me. Amazingly, I hit a great passing shot that landed deep in the court and just inside the line. After making that shot, the pro called me to the net. I was sure he was going to compliment me. Instead, what he said was, “That shot will be your worst enemy.” He explained that while it was an exceptional shot, it was not a high-percentage one for a good weekend player like me. Remembering how good that shot felt, I tried to repeat it. Unfortunately, I was rarely successful. He pointed out that while he could make that shot perhaps 90% of the time, I was likely to make it less than 10% of the time. The pro then asked me if I’d rather make great shots or win matches. Up until that point, I thought that one led to the other.

The pro taught me otherwise.

Read the full article here by Larry Swedroe, Advisor Perspectives


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