14 Jan What Rafael Nadal’s forehand can teach us about investing
Melbourne is in the grip of tennis fever with the Australian Open starting this week. I am a massive fan and look forward to this fortnight all year.
In years gone by, the professionals used to hit the ball very flat and low over the net. For example, John McEnroe used a continental grip on both the forehand and backhand side. This is in stark contrast to the modern day player who use extreme Western Grips to generate topspin to clear the net by a wider margin. The best example of this is Rafael Nadal who hits his forehand with a whipping action, lassoing the racquet over his head on the follow through to generate an enormous amount of topspin. The theory is to clear the net by a metre or more and land the ball well inside the lines, using the bounce caused by the extra spin to take the ball out of the opponent’s hitting zone. This kind of shot allows for a much greater margin of error – and keeping the ball in play is the key to winning more points.
The same can be applied to investing. It is always better to invest in something that can perform, even if things go somewhat wrong along the way. A sustainable income stream from investments (be they property or shares) is akin to a topspin shot – it doesn’t guarantee a great return or a winning point but it does the keep the ball in play. Allowing a margin for error means avoiding investments where any small hiccup can cause the investment to fail. In the property market, it is always preferable to buy in a good area, close to the city that will be in demand by a wide range of tenants even if the current ones leave. For shares, it pays to invest in businesses which have very strong market positions and high barriers to entry.
In the modern game, no one defends better than Novak Djokovic who slides around the base line and scrambles back balls that others wouldn’t even attempt. Share market volatility as we have seen in recent months (with the market falling by 18% between April and December 2015) can also make us feel that we are scrambling to keep the ball in play. Smart investors take the opportunity to turn defence into offence by staying the course and buying in where their circumstances allow.
However, good tennis players also know when it is time to go for a winner. For example when the ball sits up nicely and your opponent is out of position. Over a lifetime, there are several outstanding investment opportunities which will present themselves and at these times, it is pays to be bold and take the risk. These investments may not be share or property market related. It may be the opportunity to start your own business or buy into an existing one, the success of which will have an enormous impact on your long term wealth. These are the rising stars like Nick Kyrgios and Daria Gavriolova who may well be future grand slam winners!
In the meantime, allow a margin for error in your rallies and take the opportunity to hit a winner when the moment arrives. Vamos Rafa!
Who is your tip to win the Australian Open this year? Leave a message below. Alternatively, if you want to have a chat about the tennis or investing, drop me a line on 9211 0175.
Enjoy the tennis.
About Reuben Zelwer
Reuben Zelwer established Adapt Wealth Management in 2011 to help time poor clients achieve financial freedom. For over 15 years, Reuben has helped professionals, executives, business owner and those approaching retirement make the most of their circumstances by making good financial decisions. Reuben’s professional practice is complemented by substantial voluntary work, which has included setting up financial literacy and savings programs in the local community.