Disc Golf Investing
By Paul Copeland, CFA & Portfolio Manager
My friend Rob was part of a group who designed the Living Memorial Park Disc Golf Course in Brattleboro. Unlike traditional ball golf courses, many disc golf courses, including 3 in Brattleboro, are free to play. I’m happy to save significant money by playing disc rather than traditional golf, but I also appreciate another aspect of no greens fees: time. When I pay for 18 holes of golf, I must spend large blocks of time to “get my money’s worth” by playing the full course. With disc golf I can play a few holes with Rob on my lunch break. Or I can take my sons out and quit whenever we feel like it, because I’m not conflicted by the sunk cost of greens fees.
While disc golf is cheaper, it’s not free. Each disc generally costs between $10 and $20. I carry 3 discs while Rob often plays with 15 to 20. As people play more, they tend to buy more discs, not only because you occasionally lose them, but because they act differently. A variety of discs gives the player more tools for reaching the goal (throwing a disc in a basket). A standard basket is generally on a pole with a rim at the top, on which chains come down into the basket to help catch the discs. A player starts at a tee box about a hundred yards away. Each “hole” is different. A player tries to reach the goal with as few throws as possible. After picking up their disc from each throw, the player can choose any of their discs for the next throw. I don’t want to offend my golf loving colleagues at Trust Company of Vermont, so I’ll hold my pen on all the benefits of disc over traditional golf. Still, perhaps I can justify my lunch breaks by sharing some aspects of disc golf that can relate to sound investing.
Distance matters
The 3 discs I carry are a driver, a mid-range, and a putter. Drivers have a wider rim, thinner profile, and narrower outer edge, designed to be thrown harder for more speed and distance. The putter is designed for stability and straight flight with softer throws. It doesn’t need speed to glide straight toward the basket.
At TCV, we enjoy helping clients reach their financial goals, such as living in retirement, helping someone pay for college, leaving money for heirs and/or charity, etc. Some goals are a long way off and a driver is the best disc. Other goals are close and need a putter. Stocks, bonds, and cash are the drivers, mid-ranges, and putters we use. For any distance over 5 years, stocks are almost always going to “out drive” bonds and cash. The longer the distance, the greater the advantage for stocks. Over the last 15 years, stocks have returned 312%, bonds 93% and cash 20%.** But as we saw in March of 2020, stocks can be very volatile over the short term. The stock disc is a dangerous choice when the basket is very close. Clients often have several goals that we can put in baskets. I spend a fair amount of time selecting the best combination of discs for different baskets.
The path matters … sometimes
Rob’s many discs have a wide variety of stability, from overDisc Golf Investing Paul Copeland, CFA – Portfolio Manager stable (that go farther straight before fading to one side) to under-stable (that curve or “turn over” much quicker before eventually fading at the end of flight). Using different discs with different throws such as an S-curve (where the disc curves one way and then back the other way), a roller (disc rolls when it hits the ground), or an overhand (thrown over one’s head), Rob can get around, under and over obstacles such as trees.
To reach financial goals, obstacles such as taxes and legal regulations often need to be navigated.
I don’t have the specialized discs and skills to work around these, but thankfully I can rely on TCV colleagues including several tax specialists, 2 Certified IRA Service Professionals, and 5 lawyers. These experts can collaborate with clients, their attorneys, and accountants to navigate complex obstacles with a variety of techniques.
Sometimes people focus on the path to the detriment of the goal. I was surprised when I first saw Rob throw an S-curve in an obstacle-free fairway. Rob explained that since discs fade to one side when they slow, an S curve can give him more distance as it gets full flight, even though it may not be as accurate.
Don’t get distracted by the path. What’s important is getting to the goal. On a long hole, the distance gives us margin for curves. If you have a distance of many years until your goal (retirement or gifting, etc.), you want the stock disc that’s got the best chance of going the farthest. Too much focus on avoiding movements along the way can be a losing strategy for long term goals.
Overconfidence is risky
Sometimes in disc golf you throw a disc exactly where you wanted. “I knew I’d place the disc there”. In hindsight, I can review what I did, why it worked exactly as I had planned and why it will continue to work. This overconfidence can lead me to leave no margin for error on my next throw. I might try to thread the needle of obstacles and with no margin for error, I hit a tree or land in a swamp and am much worse off after my throw. I should have sacrificed the “perfect throw” for a good throw. (At this point a traditional golfer might throw her club in frustration. At least in disc golf, I can try to disguise this as “practice”.)
The consequences of overconfidently taking too much risk on a throw in disc golf are minimal. For me it might mean wet shoes, a lost disc, or losing the hole to Rob by even more strokes than usual. Overconfident investing can have much more significant consequences. Some people’s goals are far out in the future, and they need a driver to cover the distance. The stock market is up 93% since it’s low on March 23, 2020, but they’ve been puttering around in cash, confident that a crash is coming. Their confidence in a drop has put them behind on their goal. Others have done so well in stocks, often a particular stock, that they don’t want to switch to bonds or cash as they get close to the goal.
At TCV, we encourage a periodic review of your current asset allocation considering how far out your goals are. We want to help make sure you are not using your putter too far away or your driver too close, leaving you far from your financial goal. If you are a golfer, I might also recommend switching from traditional to disc golf, investing the money you save on greens fees.
** Cumulative performance through 9/30/2021 – Stocks measured by S&P 500, bonds measured by Bloomberg Barclays US Agg. Index, cash measured by Bloomberg Barclays 1-3m Treasury