It’s playoff basketball time and this past week we saw all kinds of buzzer beaters from Derrick Rose and Paul Pierce in some really exciting games. The NBA loves statistics, and I love looking at those statistics and thinking about what it may mean when it comes to your money. So, how the heck does the mouthguard that newly crowned MVP Stephen Curry wears and investing wind up in the same category? This is where the ‘your smart money moves’ column takes everyday life and turns it into valuable money making lessons.
The Wall Street Journal (source wsj.com) did a recent study looking at all of Steph Curry’s 337 free throws taking during the course of the NBA Season. With the Mouthguard out, Curry shot 198 for 214 from the free throw line which is a 92.5% shooting percentage. With the Mouthguard in, Curry shot 110 for 123 which is an 89.4% shooting percentage. The real difference between these two is 3.1% (or 3.35% real growth) which is a substantial increase in free throw accuracy. Golden St. Warriors general manager Bob Meyer said, “Maybe we should communicate that to him.”
So, what does this have to do with investing and making money? First things first, most investors don’t take the time to actually review their strategy or their overall real performance. If you have taken a particular fork in the road with how you invest your money, isn’t it important to gather data to ascertain which part of your strategy is working well and which part is working less well? Without going through this step, you are sure to make continuously uninformed decisions which will likely lead to lower quality results.
Second, the difference in earning an extra 1% on your money over the course of 30 years could lead to hundreds of thousands of dollars or even millions of dollars more in your pocket. So, if you knew (the mouthguard out) that a certain strategy, fund, investment, etc. was a higher quality longer term performer, wouldn’t it be smart to do more of what has worked consistently well? What’s true about both sports and money is gaining small increments of percentages on what you are currently doing can expand itself into huge results over the long term. $100,000 invested at a 7% return over 30 years with no additional investments (assuming no taxes) would grow to $761,226. At just 1% more to an 8% return the same analysis would grow to $1,006,226. That is almost a $250,000 difference!! (source: https://www.calcxml.com/calculators/savings-calculator-growth?skn=#results)
Professional athletes including Steph Curry have all kinds of different coaches including a head coach, a shooting coach, a weight training coach, and more. Coaches help the upper echelon athletes become even better by managing these statistics to maximize performance. Getting a financial coach to look at your data and give you professional advice could help you recognize the patterns of what you are doing right and wrong. Could this make the difference between retiring early and never being able to retire? The answer is uncertain, but you might just want to know if your mouthguard should be in or out.