It might be that it is lacrosse season, or simply the coach in me, but instead of seeing the fault in many investment plans as the ‘Hail Mary’ or ‘Sacrifice Fly’, those I come across with new clients look more like the good old ‘Gilman’.
What exactly is the Gilman you may be wondering?
If you are not familiar with the sport of lacrosse (also known as The Creator’s Game, and the national sport of Canada), think hockey and soccer combined. The Gilman is a strategy for transitioning the ball from your defense to your offense when you lack the talent to run or pass the ball up the field.
The idea behind the Gilman is simple. When a team takes possession of the ball in their own defensive zone, the goalie or defensive player winds back their stick, and heaves the ball as far as they can down the field.
And while the goal of moving down the field has been accomplished (at least, momentarily), there is plenty that is wrong with a Gilman strategy. For one, it ignores the principle that the team goal isn’t just to get the ball down the field; the goal is to score points. The likelihood of possessing the ball is halved, and the chaos that ensues increases the chances of an undesired result.
Clumsy investing is a lot like Gilman. Parallels to the investor are:
• Sloppiness – Investors who don’t have the fundamentals down are prone to behaviors such as lacking assets that are diversified not only over stocks and bonds but also over economic cycles; not investing with the knowledge of how the investments fit into the overall plan; and having inappropriately aggressive or conservative allocations. They have multiple accounts and products, none of which is working toward the bigger picture.
• Low chance of success – Gilman investors are more likely to pull out of assets at their lows, and invest in assets at their high. And while they may have amassed a significant amount of savings, they know it is not enough and are more likely to seek products as solutions. Their behaviors lead to a lesser chance of achieving their goals, and they are a financial product salespersons dream.
• Volatility – A Gilman investor is lured by strategies that did very well yesterday, only to trail tomorrow. They time markets, economic cycles, and frequently can be seen in the riskiest products (knowingly, or not) to do so.
But, the main problem with the Gilman is it is done by teams who don’t have the fundamental skills necessary to play the game.
Investors that Gilman trail traditional and time-tested investment strategies, rarely score investment returns as they jump from one bad idea to the next. The ever-changing flow of the economy sends them into a panic every time.
