What the Matildas' penalty shootout can teach investors

Don’t know about you but I can’t bear the thought of another Matildas penalty shoot-out!

Although penalties are probably the worst way of deciding a football game, they can actually teach us lots about investing.

After analysing hundreds of penalty kicks, researchers discovered that goalkeepers opted to dive left or right around 94% of the time and stayed put only 6%.

The penalty taker however went down the middle nearly 30% of the time.

The study showed that the “save percentage” could double if goalkeepers simply stayed in the middle a third of the time. You look silly though if you just stand in the middle and the penalty taker coolly slots it to your left or right.

As humans we prefer action because it makes us feel more in control. But many times, we are not!

For instance when it comes to investing we think we can take decisive action to benefit from any share market boom or avoid the worst of any share market crash.

Yet, taking action has many costs in investing.

In the words of Jack Bogle, “don’t do something, just stand there!”.

A lot of the time this is easier said than done, especially with news outlets pumping out sensationalist stories to invoke emotion.

The chart below shows the 11 year track record (since inception in August 2012) of our Ophir Opportunities Fund which has generated 21.5% p.a. after fees over this period.

Whilst myself and other long term investors have been very pleased with these returns, it certainly hasn’t been a straight line journey.

The shaded circles highlight those times where the Fund has seen elevated redemptions and it’s no surprise they occurred during market pullbacks. Every time I remember being told by people considered ‘experts’ that this is the end.

I’m reminded of Peter Lynch’s Magellan Fund which averaged an astounding 29.2% p.a. from 1977-1990, more than double the S&P 500’s 13.2% p.a. rally.

But Lynch himself had calculated that the average investor in his fund only made approximately 7% p.a. over the same period as they bought after rallies and sold after falls in an attempt to time markets.

As Lynch famously said, “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in the corrections themselves”.

There is always noise and 1000 smart people telling you now is the time to sell.

But like the goalkeeper, sometimes the best thing to do is to just stay put and stick to the plan – increasing the chances of reaching your investing goals (pun intended).

Go the Tillies!