If you’ve seen the Brad Pitt movie or read the book of the same name about the Oakland A’s, you’ll know that Moneyball refers to using an evidence-based approach for picking baseball players to populate your team. As mentioned in the film, the goal is to buy base hits, which portend to eventual scored runs, for the least payroll cost. Instead of buying star players the A’s focused on buying runs.
Investment Runs=Investment Results
Here’s how you can apply a Moneyball approach to your investments.
- First, you must field an entire team. No use having a great shortstop if no one is pitching or covering first. Deciding on an asset allocation comes before selecting your players. The teams you play against are the financial goals you wish to achieve. A younger team can be more aggressive while an older team will likely take a more balanced approach.
- Look for the most return (runs) for the least cost. Do you own marquee funds with high turnover, high expenses, and concentrated portfolios? At times, they’ll hit home runs though frequently they’ll strike out. Meanwhile, your lower turnover, lower cost, and more broadly invested funds will frequently produce better results.
- Mind the mental game. At times, it will look like you made a bad decision. You may even be last or nearly last in the standings. “What am I doing, you’ll think.” Get your head back in the game. Focus on the basics. Don’t make emotional money decisions.
- And talk to your planner. As much as anything else, we are here to talk when you get the itch to start cutting players.
Is your investment strategy focused on buying stars, or runs?