Wednesday, January 31, 1996
Better Than Golf?
by MF DowMan

Several years before I became a Foolish investor, I took up a similar pastime---golf. How's golf like investing? Well, I'll get to that in a minute. I'm not completely sure which of the two "games" I prefer these days. The answer probably varies depending on where I am at the time. Right now in Lexington, Kentucky, where it's cold and blowing snow flurries, I'll take investing over golf. Put me on a tee box in Arizona or Hilton Head, though, and I might say "Dow who?" I guess my point is that I'm hooked on both, and that's probably because I see the two "games" as so similar.

The first, and perhaps most obvious similarity is that so many people are so bad at both golf and investing. And I'm not even talking about form and style. No one cares if your grip looks goofy and you wear cut-off jeans and worn out tennis shoes as long as you're driving the ball 250 yards right down the center of the fairway. Your competitors' reaction will only be "nice ball," and then their $250 designer sweater starts to get tighter around the neck as they step up to the tee. What counts is performance. And for golf, as with investing, performance can be measured objectively.

For golf, the measure separating golfers from hackers (a group which claims me as a proud member) is par. If you're breaking par, you're a stud, a scratch golfer, "da man" (to quote some rich idiot who travels to every pro tournament and yells the phrase as each player tees off). The reason breaking par is such an accomplishment is that so few of us hackers out there will ever pull it off. I've been golfing for roughly ten years (off and on), and I've come close once. I was on a streak of really good rounds one summer in college and before it all came tumbling down, I was even par one afternoon, heading to the 17th tee---a par 3 island hole. No room for error. As any sports fan will tell you, adrenaline does things to you, so when I stepped up to the tee with my usual 7 iron, I was dead before I swung. I was so excited about shooting par for a whole round that the adrenaline was coursing through my body. Splash! I should have hit a 9. Since that day, I've never threatened par again. I'm one of those comfortable bogey golfers, shooting in the high 80s or low 90s.

Amazingly, investing has a similar benchmark that so many people lose to---the S&P 500 Index. Like par in golf, the S&P 500 gives us an objective target to aim for, and it takes some intelligence to beat that mark. Most professional money managers and mutual funds don't do it. Most individual investors don't do it. What's amazing about this fact is that for Fools, the S&P 500 benchmark is actually TOO LOW! Anyone spending the fifteen minutes a year it takes to use Beating the Dow has crushed the investing game's "par" for decades. And with a little more Foolishness, the standard set by Beating the Dow can be bested.

One last likeness between the two "games." Too many people cheat at both. You show me someone who takes a "mulligan" after bad shots, who improves his lie, who doesn't count penalty strokes, who doesn't putt out the short ones, and I'll show you someone who doesn't count commissions and spreads (investing's penalty strokes), who front-runs his picks in his newsletter, who talks up a stock he's currently dumping to inflate the price. But those aren't "golfers"; they're "hackers" in expensive suits.

Be Foolish---break par. Fortunately for us addicted to both games, it's at least reasonable to expect to break par at one of them. Now if I could just get my short-game under control. . .