FORE! From the 11th hole @ Bulle

“What are you thinking here, Zach?”

“Should we layup with a short iron or try to squeeze a 3 wood between the bunkers just short of the green?”

That’s the conversation that your Editor Zach Scheidt and I had at the 11th hole at Bulle Rock on Wednesday afternoon. And as soon as we talked it out, I knew I had to share the story with you…

Zach and I were teammates yesterday for the Agora Open — the annual company best-ball golf tournament that can get pretty competitive at times…

In the end, Zach and I finished at 9 over par and just short of third place, but the strategy that Zach showed on the 11th hole was nothing short of spectacular, and as you’ll see, has some striking similarities to how he invests.

The 11th hole at Bulle Rock is a 579 yard par 5. A long dogleg left that we didn’t make much easier after our drives. We chose the ball that I hit into the right-side fairway bunker which was still a good 350 yards from the green.

After pitching out 100 yards into the center of the fairway, Zach and I had a decision to make…

“Should we layup with a short iron or try to squeeze a 3 wood between the bunkers just short of the green?”

“Let’s think about it,” Zach said. “Look at it from a risk/reward standpoint. The fairway closer to the green narrows sharply and the left side is out of bounds. I say we layup short of the bunkers at a comfortable pitching wedge distance and play for the par.”

I liked the idea a lot, as doing so allowed us to play to our strengths.

You see, neither of us are the longest hitters on the course. So laying up into the fairway gave us the chance to hit the green in two without risking ending up in another bunker, or even worse, going out of bounds…

So that’s what we did. After a pitch to about 120 yards out, we were on the green in 4 total shots with a putt for par — and we sunk it! A huge par save that kept us in contention.

Although we started off with a poor drive, we continued to play to our strengths which kept us from potentially compounding our losses.

This is a concept that is just as important in investing as it is in golf.

Measuring Risk vs. Reward

Let’s say that we did decide to hit a 3 wood into the narrow fairway between the bunkers.

We only would’ve been 50 yards further with still 2 shots to make par.

Maybe for a professional golfer that’s the obvious strategy. But for us, we were just as likely to be close to the pin after hitting from 120 yards as we would be if we hit from 70. In fact, ask any golfer and trying to judge a 70 yard shot is probably more difficult than a 120 yard shot.

There was no need to try to “swing for the fences” in that situation when a smooth, easy layup would do.

The risk simply wasn’t worth the reward. Maybe you’ve heard this term in your investing career.

Think about this the next time you debate piggyback onto speculative stocks that could come crashing down any day. Instead, try following the proven, long-term income strategies that we talk about here at The Daily Edge.

Know Your Strengths

I was pulling my 3 wood left all day, so trying to muscle a shot in between two sand traps and out of the woods could’ve been disastrous.

Instead I played to my strengths — my short irons — which set us up for a par putt.

This same strategy can be used with your investment account.

One common weakness is when investors buy stock in companies that they are unfamiliar with. Doing this only adds unnecessary risk to their portfolio. I guarantee there are plenty of quality companies in areas that you are familiar with that could be better fits in your portfolio without the added risk.

Which leads me to my next point…

Always Have A Strategy

Like I said, neither Zach nor I were the longest hitters on the course on Wednesday. And even though we had a decent chance of one of us hitting the fairway between the bunkers, we would’ve been abandoning our strategy.

You see, before the round, Zach and I talked through a strategy to avoid compounding mistakes. And we couldn’t just abandon our strategy as soon as we got into trouble…

The same goes for your portfolio.

Before you start investing, you should know your goals and then lay out a strategy to achieve those goals. The same process goes for every individual investment you make.

Before you buy a stock, think to yourself — “Does this fit my strategy? Is the risk worth the reward? And have a plan for if the investment doesn’t pan out. This will keep you on track and away from compounding losses.

Here’s to keeping your edge,

Davis Ruzicka

Davis Ruzicka
Managing Editor, The Daily Edge

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