| Allow me to acknowledge first off that much of this | | | | --Know your ultimate goals and construct strategies |
| article is inspired by Dr. Bob Rotella's ''The Golfer's | | | | to reach them. Write them out and review them |
| Mind'' (2004, Free Press), particularly Chapter Three, | | | | from time to time. |
| ''Goals and Dreams.'' If you are not familiar with Bob | | | | --Remember Buffett's Rule #1: Don't lose money. |
| Rotella, he is a pioneer in the field of sports | | | | Maintain a fiduciary duty to yourself. |
| psychology and a preeminent counselor to players on | | | | --Analyze or "score" companies in an orderly, sensible |
| the professional golfing circuit. He has also been a | | | | fashion, every time. Never invest based on a hot tip |
| performance enhancement consultant to major | | | | or partial information. Some sub-goals here would |
| corporations. | | | | include: (1) Pick only excellent companies to invest in. |
| I think that ''The Golfer's Mind'' is a great book, and | | | | Avoid ones with major flaws. (2) If you are |
| that it contains ideas about positive thinking, | | | | interested in a company, write out its "story" in a |
| objectives, and practices that are applicable far | | | | few sentences. If you can't understand it enough to |
| beyond golf, to life itself. Rotella's concepts are | | | | do that, don't invest in it. (3) Invest only in companies |
| certainly valid for the individual investor. | | | | with good prospects for sustained earnings growth. |
| In his book, Rotella makes a distinction between a | | | | Companies which dominate their fields and have clear |
| person's ultimate goals and his or her intermediate | | | | competitive advantages will be best able to sustain |
| objectives which will help achieve the ultimate goals. | | | | earnings growth. (4) Don't trust management which |
| That distinction is also one of the most important | | | | has demonstrated lack of integrity. (5) Beware of |
| components of an investor's path to success. | | | | companies with lots of debt. Debt is as hard for |
| In golf, for example, a Tour pro's ultimate goals-which | | | | companies to handle as it is for individuals. |
| Rotella calls ''dreams''-might include winning one of the | | | | --Determine a rational value for any stock you are |
| four Majors, or making the Ryder Cup team. A | | | | considering. Always buy at an advantageous price. |
| duffer's ultimate goals might include breaking 80 or | | | | Wait for that price if you have to. |
| earning a single-digit handicap. (Those, in fact, are my | | | | --Manage your portfolio intelligently. Know when to |
| own goals in golf.) | | | | buy and sell. Have selling rules that are as explicit as |
| Rotella distinguishes these ultimate or long-range goals | | | | your buying requirements. Set them ahead of time so |
| from what he calls ''process goals.'' In Rotella's words, | | | | you can act dispassionately if and when the time |
| ''So often, success comes from patiently and | | | | comes. |
| persistently doing the right things over and over. | | | | --Learn how to manage risk. Use sell stops to protect |
| Process goals are the 'to-do lists' of players striving | | | | you on the downside. |
| for excellence.'' It is the process goals-as applied to | | | | --Read, analyze, and do your own thinking. Always |
| investing-which I want to emphasize in this article. | | | | keep learning. Read something every week that will |
| Your ultimate goal as an investor might be to beat | | | | help make you a better investor. |
| the Dow Jones Industrial Average by 10 percentage | | | | --Run your investments like a business: My |
| points, year in and year out. (This, in fact, was | | | | Investment Company. Be organized. Use tools like |
| Warren Buffett's goal in his first investment | | | | stock rating sheets, shopping lists, and periodic |
| partnership). Or it might be to accumulate enough | | | | portfolio reviews, rather than scattered notes and |
| wealth to retire at age 50 or 55. | | | | slips of paper lying around. |
| But how do you get there? With process goals-the | | | | Rotella begins his chapter on ''Goals and Dreams'' with |
| sound practices that you follow day in and day out, | | | | a quotation from Jack Nicklaus that is as poignant and |
| week by week, month by month, and year by year | | | | applicable to investing as it is to golf, and I will end |
| as you advance through your investing life. Following | | | | this article by quoting it: ''Achievement, I have heard |
| your process goals gives you the best chance of | | | | it said, is largely the product of steadily raising one's |
| achieving your ultimate goals. | | | | levels of aspiration and expectations.'' Follow this |
| What are some of the process goals that a Sensible | | | | yourself as an investor: Steadily raise your |
| Stock Investor might adopt in order toachieve his or | | | | expectations and skills, and take the time to follow |
| her ultimate goals or dreams? | | | | the processes that lead to investment success. |