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Are you playing a 'loser's game' at the golf course and in the stock market?

March 29, 2014

A few weeks ago, I posted an item about the nine ways active traders and golfers are alike. It was based on an interview with Kelli Keough, senior vice president in charge of client experience at Charles Schwab Co., who came up with the list of nine golfer-trader similarities.

I concluded with a 10th similarity of my own: "Golfers and traders can both be delusional about their abilities at times."

/content/dam/images/golfdigest/fullset/2015/07/20/55ad785eb01eefe207f6dacd_golf-tours-news-blogs-local-knowledge-assets_c-2014-03-181152147-thumb-470x405-119003.jpg blogger George Sisti has a piece today that explores the same theme, and reaches some thoughtful conclusions. His point is that investing is a "loser's game."

That doesn't mean you're bound to lose money. But Sisti suggests you should abandon hope of "beating the market." Focus instead on minimizing trading and investing in passive, low-cost mutual funds. Sisti links to a thought-provoking article by financial author Charles D. Ellis from 1975, "The Loser's Game."

Quoting Sisti here:

The title comes from Ellis' assertion that professional athletes play a Winner's Game' and amateur athletes play a 'Loser's Game.' For example, the winner of a professional golf tournament must execute difficult shots and outperform the competition. Professional golf is a Winner's Game -- the winner defeats his opponent by superior play. The winner of an amateur golf tournament is often the player who makes the fewest mistakes, shuns risky shots and avoids penalty strokes. Amateur golf is a Loser's Game -- the loser usually defeats himself by poor play.

With all due respect to Schwab's active traders, I'm with Sisti on this one.

As he puts it: "Unlike golf and tennis, investing is a Loser's Game for both professionals and amateurs. The biggest mistake amateur investors make is playing the stock-picking, market timing game that even the pros can't win. Create a financial plan, keep a long-term view and don't be rattled by the market's daily noise."