Invest in stocks but can care less about the World Cup? Might want to change your tune.
Starting on June 14, this year's World Cup promises to be riveting as always. But it's also a good place to find investing inspiration, says UBS strategist Christine Novakovic.
"Agility. Balance. Calm -- three attributes that complement teamwork and can transform a successful team into a future champion," explains Novakovic. "And also attributes that offer important lessons for investors to learn from successful football teams."
Here's a deeper look at each aspect from Novakovic.
Don't be scared to adjust your investment thesis on a stock if it warrants doing so.
Says Novakovic: "Agile teams can adjust their play to different opponents. Playing against a team with a very defensive lineup requires different tactics than against a free-flowing attacking team. Teams need the ability to swiftly adapt to sudden, unexpected changes during the game: An injury, a red card, or conceding an early goal can force teams to adjust their tactics quickly. Investors face similar challenges. The last 10 years have seen an unprecedented change in monetary policy tools and frameworks. The desire to stimulate growth and to fight deflationary forces has resulted in many policy inventions. Investors first had to adapt to the powerful force of quantitative easing programs. Equity markets reached new highs, bond yields new lows. Those who adjusted swiftly made bigger gains. Today, after almost a decade of policy support from the world's major central banks, the pendulum has started to swing in the other direction. The US Federal Reserve has been hiking its policy rate for a while, and the European Central Bank will likely end its quantitative easing program this year. This is occurring amid rising volatility and highly correlated financial assets. Investors should consider alternative assets and be more nimble in adjusting their allocation."
Portfolio diversification -- something TheStreet's founder Jim Cramer has preached for years -- is critical to investing success.
"Balance is another important attribute," says Novakovic. She adds: "A successful team needs top players in all positions. Keeper, defenders, mid-fielders, strikers, and a strong back up of reserve players on the side-lines. A few exceptional players can decide a game single-handedly. But the road to the final is long, and even the best players might be marked out of the game or could simply have an off day. When it comes to investments, holding a diversified portfolio of assets is incredibly important. Global business cycle dynamics as much as idiosyncratic events can trigger losses. We build our portfolios seeking to optimize the benefits of diversification. Pairing traditional and non-traditional assets, risky stocks and defensive bonds, and allocating across regions is crucial in making portfolios profitable in good times and to preserving gains during downturns."
Don't get emotional about a stock.
Novakovic concludes: "And finally calm. Even the most experienced teams risk discarding their game plan when time is running out. And the coolest forward might miss a simple shot or a penalty under pressure. The teams who can control their nerves and stick to their tactics for the entire 90 minutes (or longer) have a greater chance of success. Investment decisions are similar. The recent flare-up of geopolitical tensions in the Near East. The rising threat of a global trade war. Concerns about a selloff in global bond markets. Being able to distinguish between deteriorating fundamentals and softer growth on the one hand, and the daily noise on the other, is crucial. The former is a reason to re-allocate a portfolio, the latter an opportunity to take profit on a hedge or to double-down on an existing position. In both situations, though, staying calm pays off. And having a proven investment process at hand and the ability to stay focused on the investment objectives can deliver a big difference for an investor's long-term ability to optimize returns."
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