Financial lessons I learned from playing golf


I took up golf many years ago in order to entertain clients. I found spending four and a half hours on the golf course was a great way to build a personal relationship with them. I never dreamed I could find time to play for pleasure or that I would even enjoy the game. Today I don’t know what I would do without golf to occupy a significant portion of my leisure time.

I quickly discovered many parallels between golf and managing my personal finances and investments. Like golf, investing and personal finance can often be an elusive challenge for many people, but it doesn’t have to be. Consider the following guidelines and you’ll have a much greater chance at success with both.

Be patient and persistent

Consistent improvement with your golf game takes time. I can’t count the number of times I’d practice diligently on my swing and start to see some improvement, followed by a series of bad rounds. Believe me, sometimes I wanted to throw my clubs into the nearest pond. But players who really improve don’t give up but continue to work on their golf game.

Just like the markets, there will be lots of ups and downs, and you may want to quit. A really bad day of putting can be quite humbling. Just remember, you can’t grow if you don’t play the game. It will be worth your while to stick it out.

Course Knowledge

Belonging to a golf club or playing the same golf course a few times can improve your scores. Knowing where to aim to avoid obstacles and hazards can reduce penalty strokes. Remembering mistakes in club selection can also help improve your golf scores. (Should have hit my 8 iron on this hole)

As an investor, I spend lots of time researching the different markets before selecting my investments. Like golf, constructing or re-balancing my portfolio requires avoiding making costly mistakes in my selection process.

Bad shots are part of game

Accept the fact that you are going to make some bad golf shots. Even golf pros miss hitting some fairways & greens, they even take penalty strokes. Every investment has some degree of risk, sometimes you just have to take the loss. Both golf & investing requires managing your expectations, you are going to make some good and also some bad investments.

Play your own game

I think the most important lesson that golf teaches is to play your own game. Play according to your skill level and make the shots that you know you can make. Trying an impossible shot like hitting out of a hazard may only result in taking more strokes. Taking a penalty stroke maybe a better option. Too often, people let the performance of others affect how they play their own game.

Take lessons or hire a coach

Is it possible to learn golf or investing on your own? Absolutely, but I have taken a few golf lessons and I have also worked as a financial advisor. Some golf lessons have improved my game while others have resulted in poorer scores. Unfortunately, not all professional advice in either golf or investing are created equal. Finding the right professional at a reasonable price could help you avoid some disastrous mistakes.


My first Hole in One!

A candid conversation with my former stockbroker


My ex- stockbroker and I have remained good friends even though I transferred all my accounts to a discount broker many years ago. I was introduced to Bob (not his real name) by my insurance agent back in 1988. Bob taught me a lot about the inner workings of the brokerage business.

Both Bob and I enjoy playing golf. Every year Bob invites me to play golf at his private golf club. We have one rule: Never talk about the financial markets on the golf course. However, we did have a very interesting conversion, over a few drinks, after our round of golf.

“So Bob, I noticed that you seem to be very happy and relaxed today; you didn’t even call the office.”

“Yes, I am a lot happier. Over the past few years, I have convinced my clients to move their money into Dimensional Funds. I only have five clients who insist on buying and selling stocks. It is less stressful than trying to find stocks that outperform the market.” 

“There are so many fund companies, why did you pick Dimensional Funds?”

“All their funds have very low management expense ratios. Their fees are even lower than a lot of ETFs. They are sold exclusively through financial advisors. Advisors have to attend a three day symposium in California to get approved to even sell their funds.”

“Are you still one of the top revenue producers at your firm?”

“No, I am making less money, I charge my clients 1% commission to manage their money.  But, the upside is less stress and more time to play golf.” (big smile!)

“You and I both know that the majority of fund managers don’t outperform the market over the long – term.”

“I agree. Did you know that Harvard University’s endowment fund fires their fund managers every five years? However, Dimensional managers don’t try to predict market trends or time the market.  They keep costs down by not trading and selecting anywhere from 300 to 500 different stocks in their portfolios. They focus more on diversification, small cap and value strategies to achieve more consistent returns.”

“Have you ever fired a client?”

“Yes, so far only two clients. I played hockey on the same team with one client that kept on asking about stocks while I was having a shower after the game. When I changed brokerage companies, I referred him to another broker. I also recently tried to convince a client not to sell all his Dimensional funds. He went to 100% cash and then had the nerve to blame me that I sold his funds that had increased in value.”

“Why did you change your brokerage company?”

“Too much pressure to sell their in house products. Plus I was obligated to sell bought deals in IPOs, secondary issues, bonds and debentures.”

“I do remember a big bond issue that you didn’t like and got rid of through my margin account. Come to think about it, I really helped you get rid of a lot of junk offerings over the years.”

“Yes you did, but you always made some money on the deal! “

“True, but you always made a lot more than me!” (both of us laughing) 

“You really believe in Dimensional Funds?”

“Absolutely, I show new clients my investment portfolio which contains nothing but Dimensional Funds. The only other investment that I own are shares in the bank that owns my brokerage firm. I keep that account private.”

Are you concern that in January 2017, your commission fees will show up on clients monthly statements?

“A good question, I have some very wealthy clients. Not sure how they will react paying me 1% on their investments over the course of the year.” 


What is a ‘Bought Deal?

A bought deal is a securities offering where an investment bank commits to buy the entire offering from the client company. A bought deal eliminates the financing risk for the company, which is able to ensure that it raises the intended amount of funds from the securities offering; however, the client firm will likely get a lower price by taking this approach.

A bought deal is more risky for the investment bank, because it must then try to sell the securities to other investors. The investment bank takes all of the risk that the securities may not be able to be sold, or more commonly, that they may lose value before they can be sold, resulting in a net loss.

Source: Investopedia

Disclaimer: This post is for educational purposes. I don’t own any Dimensional funds nor do I recommend buying them at this time. I do know that Bob only gets paid about 60% of the fees that he generates. The other 40% goes to the brokerage firm.










Is another credit bubble forming in subprime car loans?

I went shopping for a new car last week and was offered a subprime loan rate that sounded too good to be true. Without even checking my credit history, I was offered the choice of nothing down & half of one percent financing for 5 years. If I wanted to pay cash for the $30,000 vehicle, the dealership would reduce the price by 2,500 dollars.

The credit manager took some time to explain how subprime loans work. Auto makers take their cash back amount and give it to the finance company to buy down the interest rate. So in my case, I could take the $2,500 cash back or it would go to the finance company to reduce my loan interest. My choice really didn’t affect the car dealer in any way.

It got me thinking about some of the articles that I read sounding the alarm bells on the rising delinquency rates in subprime auto loans. Much of the concern centers around loans extended to borrowers with credit scores below 600. Some articles warn that the auto-loan market is a powder keg like the subprime mortgage market was when the globe plunged into a financial crisis eight years ago.  Will the bursting of this bubble cause another U.S. recession?

John Oliver, host of the HBO show “Last Week Tonight,” takes on the opaque world of auto lending.

Oliver points out that while helping people buy a car sounds great, lenders are taking advantage of borrowers with some predatory strategies and absurdly high interest rates. Some are offering loans to those who have recently filed for bankruptcy. Poor borrowers charged high interest rates–the average rate is 19%– end up under a pile of debt. One clip showed that a woman would have to spend $17,000 paying back a loan for a car worth $3,000.

Auto loans, including the loans extended to prime and subprime borrowers, topped $1 trillion for the first time last year, according to Experian data, exceeding the outstanding balances on U.S. credit cards. But that is a far cry compared to the $8.4 trillion mortgage market. Plus, it’s easier to repossess a car than foreclose on a home. There is typically a healthy marketplace for used and repossessed cars. Trying to unload a $300,000 home is far more difficult especially in a neighborhood of foreclosed properties.

As an investor, be aware that massive defaults on auto loans could flood the used-car market, depressing prices for all car types should the bargains among used-vehicle options sway buyers away from new cars. Both Ford & GM are trading with low P/E’s (5.8 & 3.9) and have dividend yields in the 4.7% range. The yield is very attractive for investors looking for income as long as you understand that there could more downward pressure on the stock price.

In a quarterly filing with the Securities and Exchange Commission, Ford reported in the first half of this year it allowed $449 million for credit losses, a 34% increase from the first half of 2015. General Motors reported in a similar filing that it set aside $864 million for credit losses in that same period of 2016, up 14% from a year earlier.

If you are in the market for a new or used car, make sure that you can afford the payments. Don’t fall for, no money down ads, 100% approval rates and no sin number required. Remember a car starts to depreciate as soon as you drive it off the lot. Extending a car loan to 84 months (7 years) keeps your monthly payments low but the outstanding loan could be greater than the value of the actual car.