How to be a Successful Investor Over All 12 Months

Mark Twain once commented on the celebration of New Year’s and said something to this effect:   Last week everybody smoked his last cigar, took his last drink and swore his last oath.  This week we are a pious and exemplary community of investors.  Cheers to another new year as we leave last year’s obituaries behind.  Take a deep breath and let’s figure out what we all need to do more of so we can celebrate what we want to experience more of – profitable trades.

The cornerstone of profitable trading is routines.  My experience with new investors is that they begin to “short circuit” when I explain that they’ll need more than their one “buying routine” to succeed.  Imagine how these same folks react when I show them the complete roadmap of investment routines.  Suddenly, they need the equivalent of an emotional Band-Aid.  I try to convince them that the total can indeed become greater than the sum of individual parts by combining investment routines into a comprehensive written trading plan.

At this point, I hope I have moved them beyond mere curiosity and I have their undivided attention.  I explain that they must be willing to jab two fingers into the eyes of both the dragon of self discipline and the dragon of emotional control.  Once they muzzle and gain mastery over both these beasts, they can move on in their quest for profits.

Part of that quest in the broadest sense is to layout your investing routines on an annual basis.   I‘ve often used the “slinky” metaphor to describe the human nature of investors.  If you don’t do some strategic planning, you’ll find yourself and your trading resembling something of a series of events that stretch out the slinky and at some inopportune future time, come screaming back at you as the slinky once again compresses.  Painful, unproductive and unnecessary!

So here I propose a roadmap for the coming year to allocate your broad investing activities across all 12 months that will contribute to you maximizing your profits and minimizing the “slinky tail slap”.  By tackling these few tasks each month over the year, it will be quite manageable.  Try my plan and jettison the slinky.

JANUARY:  Update your net worth.  Contribute to your retirement plans (check if limits have increased).

FEBRUARY:  Gather up all your paperwork and start preparing taxes.  Revisit all your account information and update it (don’t forget to update your passwords).

MARCH:  Review your broad asset allocation strategies with respect to your family and your own personal risk tolerance.  Evaluate your portfolio diversification and present correlations to the markets.

APRIL:  File your tax return.  Review your emergency cash needs and the adequacy of your existing funds.

MAY:  Retirement review.  Are you saving enough to retire when you plan to?

JUNE:  Review your children’s educational goals and your financial needs.  Review your written investment plan (preferably while sitting by a pool with some ice tea).

JULY:  Half-year portfolio performance review, relevance and adjustments.  Revisit the percentage withholding on your paycheck.  Is it enough to cover your income taxes?

AUGUST:   Insurance review – check adequacy and deductibles.  General asset protection review.  Before you invest it, you have to protect it!

SEPTEMBER:  Meet with your estate attorney to plan and update your will to reflect changes in the law.  Check your debt situation.  Are you comfortably under control?

OCTOBER:  Evaluate your workplace benefits.   Review your medical, dental and disability insurance coverage for adequacy.

NOVEMBER:  Review any sizeable gains and losses to make smart moves before December 31st. Make any final charitable contributions before year-end.  Talk to your accountant about any tax law changes that might impact you.

DECEMBER:  Reassess your present asset allocation.  Are you over or underweighted in any of the key asset baskets?  Do a performance review of all investments before year-end.

In closing, I’d like to quote golfing great Ben Hogan:  “As you walk the fairway of life, you must smell the roses, for you only get to play one round.”  So muzzle your dragons and get it right.

Trade well; trade with discipline!
-- Gatis Roze

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Staying Atop the Market

The stock market is always one step ahead of you. The sooner you accept this fact, the better for your trading results. It helps to think of the market like the rabbit on the rail at the greyhound racetrack. As an investor, you should never mistake yourself for the rabbit or else the market will have to humble you and remind you that you are just a dog. The best you can expect to be is a greyhound in close pursuit, tethered to this market rabbit by an invisible rope. The fact is that the market rabbit is not really in the race. You are racing your fellow greyhounds. They are the ones whom you want to stay out in front of.

The questions you should ask are twofold. The first question is how to stay tethered to this rabbit. The second question is how closely tethered you actually want to be. Candidly answering the first may result in your answering the second by default. So focus on the first question and then ask yourself this: what you are willing to do each day to maintain your connection to the market? Your personal daily circumstances as well as your emotional commitment and discipline should guide you to generate a reasonable answer. With those inputs, you can then decide whether you allocate 30 minutes a day or 30 minutes a week.

The point here is that your allocation should be unique to you personally. To be successful, it must be based on brutally honest inputs by you about yourself. For this to work best, you must be willing to put it in writing, making it easier for you to revisit on a regular basis. You should also note that it’s not unusual to be overly optimistic at first about your abilities to pay attention and stay on top of the market.

As real time investing plays out, it might become a bit more comfortable to adjust your routines – let out some rope, so to speak – and not try to stay so close. By default, you therefore answer the second question. How closely tethered to the market rabbit do you really want to be?

It becomes crystal clear that the more closely you remain tethered, the more significant the commitment in both time and emotional capital required to do so.  A day trader better be prepared to be tethered to the market rabbit on a very short rope.  The position trader less so. A long-term investor comfortably less so.

The bottom-line is that there is no one magical tether. The challenge is to construct individual routines that match the personal fire in your belly so that you remain in equilibrium and are able to maintain consistent focus and discipline over the long period of time that you will be tethered to the market rabbit by this invisible rope of your own design.

Trade well; trade with discipline!
-- Gatis Roze

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Money Management: Why Market Wizards Claim It’s the Secret Sauce

In his Market Wizards books, Jack Swagger interviews an outstanding collection of renowned investors, traders and money managers.  The single most common thread that each mentions as being a major contributor to their success is their money management skills.

The challenge is to understand what they mean by money management.  The internet is full of definitions, ranging from simplistically useless to overly complex and potentially harmful.  In past years, I’ve surveyed my classes for their personal definitions.  On two separate occasions a decade apart, we constructed in class definitions that I believe accurately capture what these market wizards meant when they attributed their success to their money management skills.

What both groups of the investors I surveyed agreed upon was the notion that money management is a process.  In its most basic form, it involves setting goals, getting organized and executing a written investing plan.  Both groups also agreed that money management is very personal and individualistic in nature.  It will change over time as the investor’s needs shift, but honesty and candor are essential ongoing ingredients in any effective written money management plan.

My first investor group formulated a money management process consisting of 8 issues constructed as questions that challenged each individual investor to answer in writing in a manner most appropriate for him or herself. 

How do you get your money?  What are the sources of your cash flow and are they dependable or variable?How do you feel about money?  Did you inherit your wealth and see money management as a burden or part of your lifestyle?  What is your tolerance for risk?Where do you move your money?  What percentage of your assets are you comfortable placing in various asset baskets?  Do you see yourself as an investor, a trader or a watcher?How do you move your money?  What are your investment analysis routines and which trading methodology do you employ?Why do you move your money?  How will you decide it’s time to invest?How do you protect your money?  What sell disciplines do you have in place?  Have you adequately insured yourself and your family to protect all your assets?How do you spend your money?  What are your lifestyle priorities?  How much money will you invest, spend and distribute?When will you spend your money?  What is your time horizon and does your current estate plan reflect your present wishes?

Ten years later, I surveyed the second class of student investors.  Their definition was more concise yet the parallels were undeniable.

“Money management is a written, personally-appropriate financial framework describing the types of investments and strategies that you feel will align with your personal goals, objectives and priorities.  These guidelines describe the rules and tools you deem appropriate in managing your wealth.  They acknowledge your risk tolerance and the risk management techniques you employ to protect your assets.  Finally, they provide an ever-changing lifelong timeline and roadmap recording the methodologies and resources you use to ensure disciplined stewardship of your assets as you attempt to maximize the return on your investments.”

The key take-aways for all you budding market wizards are these:

A. Get organized and put it in writing.

B. Put the odds in your favor by having clear goals, routines and an investment methodology.

C. The roadmap to success requires that you know yourself and know enough to stick to your rules.

Trade well; trade with discipline!
-- Gatis Roze

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There's a chill in the long putter market

By E. Michael Johnson

Just 18 months ago some manufacturers were tripling or quadrupling their fourth-quar-ter forecasts for sales of long and belly putters. That's because the demand was skyrocketing after the major success of Keegan Bradley at the 2011 PGA Championship and several wins on the PGA Tour by other players. Eventually consumer interest reached a point where manufacturers struggled keeping up.

Since the proposal to ban anchoring was announced, putter buyers have been wary. Photo: Jeff Gross/Getty Images

"We couldn't make those putters fast enough," said Michael Fox, at the time TaylorMade's global product category manager for putters and wedges. "Retailers were ordering by the thousands where it used to be they'd just take a few at a time."

A year and a half later it's a different story.

When the USGA and R&A announc-ed their proposal to ban anchoring in November 2012, many wondered what impact it would have on sales and tour usage. Some data is now available, and the early returns suggest it has had a chilling effect. According to tracking firm Golf Datatech, total putter sales in December 2012 cratered 21.1 percent versus the same month in 2011, marking the largest decline in putter sales since the company began tracking such numbers in 1997.

Tom Stine, president of Golf Data-tech, said that although his company does not break out sales of longer-than-standard putters, the drop in the numbers strikes him as cause and effect. "Did the announcement cause confusion in the market and therefore turn off golfers from buying any putters?" said Stine. "It's an interesting coincidence to think about."

Although it is possible to connect the decline with the proposed ban, it is important to remember that sales in December 2011 enjoyed a spike because that period was when golfers were rushing to buy belly putters. According to Sven Kessler, VP of retail sales for Edwin Watts, consumers would literally walk into shops saying, "I want a belly putter." When asked what model or what length, many would reply, "I don't know. I just want a belly putter." Given that, the December 2011 numbers may have been artificially inflated, leading to a larger decline in 2012.

Still, Kessler leaves little doubt about the effect of the proposed ban on sales. "At their peak in spring 2012 nearly 30 percent of our putter sales were either mid- or long-length," said Kessler. "That number dropped substantially after the rumor surfaced last summer about a possible ban and has only gotten worse since the announcement in November. We're having trouble moving inventory of these clubs."

On tour the impact has been just as noticeable. As many as 25 long/belly putters were in use at several events last season, but so far in 2013 that number has been slashed. At the AT&T Pebble Beach National Pro-Am just six players used such putters. Between the Northern Trust Open and Match Play only 12 different players went longer than standard. While those who have such clubs for long periods of time or with significant success (such as Tim Clark, Carl Pettersson, Bradley and Adam Scott) continue to ply their trade with them, others who had only recently begun experimenting with them such as Charles Howell III and Robert Garrigus have decided not to go any farther down the belly-putter path until the rule is clarified.

In the meantime, some manufacturers, anticipating the ban being enacted but golfers still wanting to use longer putters in a legal manner, have begun rolling out product designed for that purpose. Shortly after the proposed ban was announced Odyssey unveiled its Metal-X Arm Lock putter while TaylorMade recently debuted its Daddy Long Legs model on tour with Vijay Singh and Steve Marino putting the club in play. Both putters have longer-than-standard lengths but are designed to use counterbalancing, not anchoring, to stabilize the stroke.

Those putters may stabilize the stroke, but the use and sales of long and belly putters is likely to remain wobbly for the immediate future. For those still in the market for a long or belly putter, there is some good news, says Leigh Bader, president of 3balls.com and one of the driving forces behind the PGA Trade-In Network. "It may have been that people bought them and just found they couldn't use them very well, or it may have been the proposed ban," Bader said in January. "But belly and long putters are among our most-traded in clubs right now."

GARY WOODLAND // Driver alterations

Switching equipment companies almost always comes with a learning curve, and that's been the case for Gary Woodland, who has worked with a few drivers this year as he settles in with his new Callaway clubs. At PGA National, Woodland made some changes to the company's RAZR Fit Xtreme driver he had been using.

Although the club says it has 8.5 degrees loft, the actual loft is 8.2 degrees. Woodland also used the club's adjustability to put a 7-gram weight in the heel and a 14-gram weight in the toe. The thought behind the heavier weight in the toe was to move the center of gravity just enough to produce the hotter flight Woodland sought. The results seemed to indicate the changes worked as Woodland ranked third in driving distance at PGA National at 304.4 yards per drive.

MIZUNO JPX-825 PRO
PRICE: $900 (Set of eight, steel)

Stacy Lewis won the HSBC Women's Champions using these irons where the 8-iron through the wedges have a thicker face to promote a more penetrating flight.

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During the final-round telecast of the Honda Classic, announcers frequently referenced the 5-wood Michael Thompson was using but never named the club -- perhaps because they had never heard of the company. Thompson's 5-wood was a 17-degree Akira M117 prototype -- a club with a smallish head (120cc). A Japan-based company, Akira was formed in 2001 and its clubs have been used by numerous players on the Japan Tour, but rarely on the PGA Tour. ... Odyssey's Versa putter added a few converts at PGA National, including Branden Grace who used a Versa #1 Wide with black/white/black. Grace's putter was customized with a Metal-X insert that Grace felt was closer to the previous Black Series Tour Design #1 Wide putter he used during his four European Tour wins last year. ... David Duval shortened his Nike Method 006 putter a half-inch, making it 36 inches in length with a belly grip that counterbalances the putter. ... The 2-iron was popular again at PGA National. Among those putting the wind-cheating clubs in play were Tiger Woods (Nike VR_S Forged), who had the lie angle on the club bent more upright at the Match Play, and Hank Kuehne (TaylorMade RocketBladez Tour). Others included Paul Casey, Duval and Seung-Yul Noh.

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Onward & Upward into the New Year

It’s hard to improve upon the short and pithy advice from my favorite founding father, Benjamin Franklin. 

“Be at war with your vices, at peace with your neighbors, and let every new year find you a better man.”

In 2013, promise yourself to embrace your goals, your dreams and those you love.  Happy Holidays!

Trade well; trade with discipline!
-- Gatis Roze

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Five questions with Holly Sonders

A member of the Big Ten champion Michigan State golf team in 2007, Holly Sonders has been part of the Golf Channel's "Morning Drive" team since January 2011. Here she handles five questions from E. Michael Johnson.

Q: You just joined with Cobra-Puma. What kind of input might you have on its apparel line?
I've already spoken to them about that. For the Puma logo on my apparel, I'd like sequins or some kind of stones and have that be my signature. Girls like bling, and I think that would be cool to have on my Puma cats. I would love to have a say in shoes and developing golf dresses. I love fashion, and Puma is fashion-oriented.

Q: Is golf more frustrating or more fun since you entered the workforce?
A little of both. You have expectations for yourself, so when you chunk a chip or miss a five-footer, that's a little frustrating. I'm still a competitor. But the pressure is off. I played competitive golf for 16 years with teammates and coaches counting on me. Now I don't even have to keep score. That's a relief, so I think I enjoy it more.

Q: What have you learned from Martin Hall?
Martin is one of the most knowledgeable teachers on the planet. He thinks of items you might have around your house you can use as training aids. He's very visual and tailors tips to different players.

Q: What would you do on your first day if you were LPGA commissioner?
I'd like to see them move to a Friday or Saturday finish and get it away from the men's schedule.

Q: What time do you have to get up for work?
I used to live 30 minutes away and woke up at 1:45 a.m. to get in by 3:30 a.m. I got so many speeding tickets I had to move. I'm less than a mile from work now, and the call time is 5 a.m. I don't have to wake up until 4:15. That's a big 2.5 hours.

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Finchem, Nike's Davis among 50 most powerful in sports

(Getty Images photo)

By John Strege

PGA Tour Commissioner Tim Finchem and Nike Golf President Cindy Davis were the only two golf representatives on Sports Illustrated's list of the "50 Most Powerful People in Sports."

Finchem was ranked 25th and Davis 46th on a list headed, not surprisingly, by NFL Commissioner Roger Goodell. Those on the list with peripheral ties to golf include NBC Sports Chairman Mark Lazarus (the Golf Channel is part of the NBC Sports Group), CBS Sports Chairman Sean McManus and IMG Worldwide CEO Michael Dolan. Lazarus is ranked seventh, McManus 13th and Dolan 14th.

Given golf's niche status in the world of sports, it perhaps is not surprising the list included only two from golf. BusinessWeek once had Tiger Woods listed No. 1, ahead of Goodell and NBA Commissioner David Stern, in its list of the "100 Most Powerful People in Sports."

There were no active athletes on Sports Illustrated's list (Michael Jordan, now the owner of the NBA's Charlotte Bobcats, came in 50th).

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