By Justin Carbonneau (Twitter | LinkedIn | YouTube) —
I’ve probably watched this Alan Stein Jr. motivational speech on Kobe Bryant at least dozen times (ok, probably like two dozen). You should watch the clip, but the essence of the story is that Kobe Bryant’s greatness and success on the court basically comes down to hard work, dedication and an obsessive focus and ability to “never get bored with the basics”. Using this story as inspiration, I thought it would be worth looking at the basics in investing and personal finance to see what investors can learn from the mindset and work ethic of one of the greatest basketball players ever. Kobe understood the importance of work and the power of compounding and honing the most basic skills over time.
1. Diversification:
Kobe could post-up, drain the three, burn opponents on his crossover and much more. He was a complete, diversified and well-rounded player. Just as Kobe honed multiple skills on the court, investors should diversify their portfolios. Spreading investments across various asset classes, industries, and geographic regions helps reduce risk and provides a buffer against market fluctuations. While Kobe used his diversified skillset to win, your portfolio diversification serves the purpose of allowing you to stay in the game and avoid making bad decisions. In investing there will also be periods that are difficult to accept, but you want to leverage diversification to help enhance the stability and potential returns of your investment portfolio.
2. Long-Term Thinking & Understand Compounding:
Kobe’s dedication to daily improvement, rather than seeking quick fixes, is akin to the power of long-term thinking and compounding in investing. The concept of compounding, where earnings on investments generate additional earnings over time, allows investors to benefit from exponential growth. Patiently allowing investments to grow over the long haul can lead to significant wealth accumulation. Those 4am morning practices for Kobe, which actually started at 3:15am with an intense warm up, compounded over time and at the pinnacle of his career they played a major role in the player he became.
3. Know What You’re Buying:
In basketball, just like in investing, understanding the game and knowing your strengths and weaknesses are essential for success. Kobe Bryant was not only known for his extraordinary skills on the court, but also for his deep understanding of the game. He spent countless hours studying film, analyzing opponents’ moves, and learning from past games. This knowledge allowed him to make informed decisions during critical moments in a game.
Peter Lynch once said that if you can’t explain the reason you own the investment to your mother in two minutes or less you probably shouldn’t own it. It’s important to know what you own, why you own it and if something has fundamentally changed with the investment thesis.
4. Nothing Always Works – Don’t Dwell on the Past:
Even the greatest basketball players, like Kobe, faced challenges and setbacks during their careers. Yes, even Kobe had very bad games. In investing, there is no foolproof strategy that always succeeds. Markets are unpredictable, and various economic factors can impact investment performance. Investors should be prepared for ups and downs, maintain a long-term perspective, and avoid making impulsive decisions based on short-term fluctuations. There are good days and bad days in the markets, but staying optimistic and understanding (and accepting) the bad days and moving on to the next one is the best mentality for success. I highly doubt Kobe dwelled on the bad games. My guess is he used them as motivation.
5. Understanding Skill vs. Luck:
Kobe Bryant’s success on the basketball court was a testament to his unmatched skill, relentless hard work, and determination. He didn’t rely on luck; instead, he honed his abilities through countless hours of practice and preparation. Similarly, in the world of investing, the distinction between skill and luck is of paramount importance.
Because there are so many variables at play in investing, luck always has some role in what happens with our investments. However, there are many skills investors can have to put the odds of some success in their favor. Informed decision-making, doing the research, disciplined investing practices and understanding the points above are some of the pillars that financial achievements are built on.
Never Get Bored with The Basics
Kobe Bryant’s mantra of “Never Get Bored with The Basics” can serve as a principle for investors to stay committed to fundamental strategies and continually improve their financial knowledge. By diversifying wisely, thinking long-term, understanding their investments, being resilient in the face of challenges, managing costs, and distinguishing between skill and luck, investors can strive for success, following in the footsteps of one of the greatest basketball players of all time.
