My Two Handicaps
I play a bit of golf - thankfully I'm not a fanatic about it, I had a game this morning. It's definitely an enjoyable way to waste a few hours, have a good dander and a bit of craic, as you would say in my neck of the woods.
I'm not brilliant at it, and it doesn't really bother me. I still get around the course eventually, and a 27 handicap is grand by me. Some of my mates and fellow players have a completely different approach, always trying to reach that fabled land of scratch golfing - the holy grail for most amateurs.
There's only one bit of the handicap system that interests me. Strangely enough, it has nothing to do with golf but just the idea itself. Having a 27 handicap means, on average, it takes me 1.5 shots more to finish each hole than a scratch golfer. No bother.
Where this becomes important for me is with my investment portfolio. I want to be at scratch with this because scratch means the average shots played for a course, and that's exactly what I'm after from my portfolio - the market's average returns, nothing less and nothing more. I simply want average.
My portfolio is a tool to give me security and growth; golf is just a game. People put enormous effort into becoming average at golf, which, by the way, is extremely difficult. The thing is, with your portfolio, it's extremely easy to be average. Simply buy a broad market global index fund and you're shooting scratch without any effort or expensive kit.
I find the irony brilliant. In golf, average performance takes extraordinary effort and skill. In investing, average performance takes extraordinary discipline and restraint. Most investors handicap themselves by trying too hard - chasing hot stocks, timing the market, paying hefty fees to active managers who mostly underperform.
They're essentially choosing to play off a higher handicap when scratch is sitting right there, available for the price of a simple index fund. Golf is for the craic, so who cares about the score? Money is for security, so why complicate what should be straightforward?
If you ever happen to play a links course in Ireland, maybe the fella wandering around the fairways with a smile on his face might just be me - a scratch player, not in golf, but in the game of finance, without a care in the world, knowing his portfolio is working away being average to pay for his next round.
Happy golfing!
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