The Analogy Of A Football Team

Liverpool FC had arrived in Singapore early July for the inaugural Standard Chartered Singapore Trophy. They rounded off their preseason tour of Asia with a 2-0 win over Crystal Palace at the Singapore National Stadium on Friday night in an epic battle. This is the first time Liverpool made an appearance in the island nation since 2011. And the turnout was by far the biggest at a sports event here since the pandemic began.

Liverpool FC is one of the world's most successful football clubs with 50 major men's first-team honours. Liverpool have won a phenomenal 19 top-flight league titles, with Jürgen Klopp leading the Reds. They have also proudly won six European Cups - more than any other British team.

A successful football team is like a successful financial plan. It requires a high level of synergy across the board from several different components. A gap in your plan will delay your retirement goals. Worse yet, you might find yourself not having enough funds to send your child to college without your son or daughter being buried by massive amounts of student debt.

THE ATTACKERS

Equivalent to growing and accumulating your wealth

The attackers' primary objective is to score. They take most of the shots and typically score the most goals for the team. It is more exciting to watch the attackers take the ball in possession and score the goal and win the match. Similarly, people are more interested in wealth accumulation because watching our monies and bank account grow generally makes us happier.

Traditionally, people just put money in the bank to save and grow their money. Nowadays there are many options available in the market to grow and enhance our wealth, that we may be spoilt for choices and confused about the types of policies and portfolio out there. Specific positions that fall under the attackers category include striker, center forward, and winger. In the same way, we can diversify our investments and not to put all our eggs in one basket.

Bonds and cash instruments (money market, savings, and CPF) operate in a protective fashion. They are a necessity for retirees who need certainty and income. The principal investment is often stable because of features like the sound creditworthiness of a bond issuer. While this may seem safe and risk free, we may run the risk of coming up short on our retirement goals and possibly outliving your income and assets, if we focus purely on them.

On the other hand, we also do not want to start making crazy bets on stocks. We should continue to explore some growth opportunities while making sure we have some downside protection with a balanced portfolio. Growth stocks are a great compliment to our portfolio. Just do not expect them to make you instantly rich, which is a common trap investors fall for. In the end, chasing after the next hot stock leaves most people feeling disappointed.

What we want is to be able to enjoy our lifestyle, spending time with our loved ones, and pursuing our hobbies. Personally, what had work best for most people is to follow a system of investing such as dollar-cost averaging. It reduces any emotional bias that we have and allows us to enjoy the investment journey.

THE DEFENDERS

Equivalent to insurance and risk management

Offence Win Games, Defense wins championships.

Focusing on the wealth protection aspect will not make you rich, but it ensures that you may never be poor.

While all the attackers worked together on offense to accumulate points for the team, or grow your bottom line net worth. The defense is essential to loss-prevention. That is limiting the damage by your opponent. Preventing the opponent team from scoring goals are similar to an insurance policy limiting your financial damages whenever unforseen and unfortunate circumstances happen.

None of us are so lucky that we skate through life without experiencing some type of loss that resulted from things like an accident, damages to a home, an extended hospital stay, prolonged disability, or premature death. Sometimes the losses can be so catastrophic that without proper insurance coverage you have to wipe out your life savings to cover the damages. While the cost of insurance adds to your monthly budget, it will prevent you from having to hit the start over button with your financial plan. 

The lesson is do not neglect your risk management plan. They are the foundation and safety net of your financial plan.

THE BACKUPS

Equivalent to saving for a rainy day

This one is pretty straightforward. No team ever wants to go to its backups just like no one wants to have to dip into their savings when the air conditioner unit needs to be replaced. However, when you have enough saved up for emergencies, it prevents you from having to borrow from a credit card or sell your pre-loved items on eBay, whenever the unpleasant surprises in life occur.

THE SPECTATORS

Equivalent to our friends and supporters

A good fan base is an important component to a team's energy. A bad fan base, on other hand, can suck the life right out of the stadium. Similarly, our friends and family play a big role in affecting how we feel about financial planning and investing in the markets.

It is said that we are the average of the five people we spend the most time with. If you want to be an eagle, do not hang out with a turkey. If you want to be happy, do not hang out with a person who is constantly complaining. If you want to be healthy, do not hang out with someone who does not watch his diet. If you want to be successful, do not hang out with a lazy person. If you hang out with the right people, you will have the right mindset and will eventually succeed in what you do.

That is why we should be on guard when it comes to spending time with people who matter the most. The people who are surrounded by friends who are not prudent about their money are often the ones who are financially unprepared for the future.

THE COACH

Equivalent to the financial coach and advisor

In a football match, good coaching is important. Coaches are calling plays, taking timeouts and making constant adjustments to try to win. If a coach makes a really bad decision, it can lose his team the game. Good coaches have the ability to motivate their players when the pressure is at its highest and call plays that put them in a position to succeed. They are also great teachers, imparting knowledge and advice at the most critical moments. As essential as good coaching is in football, you still have to have coachable players to win.

Good coaching matters more when you are planning for your retirement. You are worried about whether you will have enough finances to last through retirement. You may realize that there is a lot you do not fully understand about your investments or your portfolio. A short and timely meeting with your financial advisor, just like a timeout, can make all the difference. They can reassure you in times of fear, explain investment strategies to you in clear, simple terms and put your money in the right places so that it can both grow and be protected, depending on your specific needs and situation. You can make your coach's job a lot easier by communicating regularly with them and being willing to take their advice.

In most instances, a champion league is not won without an excellent coach behind the team. Some people may be able to manage their financial affairs on their own, but most of us need a good financial planner to ensure resources are being maximized and that goals are being achieved. Without proper accountability, what seems like a small task, gets put off. Eventually, enough of these tasks pile up and the client (team) is scrambling to play catch up. 

A good coach and financial planner pay attention to the details, they hold those around them accountable, communicate effectively with everyone involved, and make the right adjustments on the fly. They keep their cool when the pressure is on, like when the market is in a freefall.

If you are looking to engage a financial coach or seeking a second opinion,  book an appointment with me now for a non-obligatory consultation.