# Are You a Hole-in-One Investor or a Scratch Investor?

By Doug Buchan, CFP®

Here’s a quick tutorial for nongolfers; the rest of you skip to the next paragraph. The term “scratch” golfer refers to someone who shoots even par on average. A typical golf course has 18 holes. Each hole is either a par 3, par 4 or par 5. If a hole is a par 3, and you get the ball into the hole in three shots, you have made par and shot “even” on that hole. Most golf courses have a par of 72 for 18 holes. If you shoot 72, you have shot even par for the course.

Shooting even par is extremely difficult for most of us mere mortals. So difficult, in fact, that the Golf Handicap and Information Network (GHIN) calculates that less than 2% of regular golfers can be rated scratch or better. Add to that the number of weekend warriors who aren’t even registered in the GHIN system and the number of scratch-rated golfers out there drops to below 1%.

Less than 1% of the golfing public are scratch golfers or better. Hold that thought for a minute.

Now, even if you’ve never played golf in your entire life, it is quite possible that you know someone, or of someone, who has made a hole-in-one. Countless average and even below-average golfers have made multiple holes-in-one. My dad has had three, and that guy is terrible! (I have not, and no, I’m not bitter. Ok, maybe I’m a hair bitter.)

You see, holes-in-one have little correlation to the quality of the golfer, and there’s a reason for this. Luck. There is a high degree of luck involved in hitting a hole-in-one. Sure, a scratch golfer is usually going to hit the ball closer to the hole than your average duffer, so his chances are higher, but they’re not that much higher.

So, virtually anyone could make a hole-in-one with enough swings and enough luck, but more than 99% of us will never be scratch golfers.

Here’s the thing about scratch golfers: They’re not scratch because they hit the greatest number of spectacular shots. They’re scratch because they hit the fewest number of really terrible shots.

And so it is with investing. The key to becoming a superior investor is simply to avoid terrible – but terribly common – investing mistakes.

The execution of the preceding sentence is incredibly difficult for most people, which is why most people aren’t superior investors over their lifetime. Even the concept is hard for many average investors to accept. Every golfer knows that a hole-in-one is more luck than skill. Every gambler knows that the right number coming up on the roulette wheel is a lucky result. But, for some reason, every day investors think that they were skillful when they bought Apple for \$60 and sold it for \$140.

Having the discipline and patience to play the correct game, even when “average hacks” are outperforming you, can be difficult. One of the toughest tests of your investing mettle is sticking with your game plan after hearing about your idiot cousin getting rich off an “investment” while your portfolio is “meh” because it’s all “diversified” and stuff. I’ve seen really decent golfers perform terribly because they’re playing with some ace who’s out-driving them, and they start swinging too hard in an effort to keep up. I’ve never seen a scratch golfer do that. Discipline and patience in the winning strategy, regardless of the noise around you, is the key to superior returns.

I like to think of an investing year as a single hole in golf. Any average golfer can outperform a scratch golfer on any given hole, even by a lot. I once made birdie (one shot under par) on a hole while my scratch playing partner made double bogie (two shots over par). I crushed him! It’s even conceivable for an average golfer to outperform a scratch golfer over a nine-hole run. But on 18 holes? Extremely unlikely. Over a 36-hole stretch? Not a chance. Literally, not a chance.

Play the investing game that gives you the best chance to be superior over that 36-hole stretch and longer. Every golfer owns a slightly different set of clubs and develops a slightly different swing to ensure the best chance of success on the course. Every investor should have a slightly different, customized asset allocation and asset mix to ensure the best chance of success in meeting specific financial goals.

Golf and investing are analogous in many ways, but in one important aspect they are also very different: Unlike with golf, anybody can become a scratch investor with the correct education, tools and coaching. It just turns out that only a tiny minority ever end up doing so.

The opinions expressed by featured authors are their own and may not accurately reflect those of The BAM ALLIANCE®. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice. © 2019, The BAM ALLIANCE®

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