With the start of the baseball season upon us, we take a look at the similarities between baseball and investing.
Just imagine that three guys grew up together with a common dream: to be a baseball pro. Guy number one started training all day, ditched school and planned to make his whole life into one long baseball training session. Guy number two made a plan that would mix his baseball training with his schoolwork and guy number three decided to start training after graduating from college. Which of the three is most likely to be a pro in future? We’ll get back to that later. How does becoming a baseball pro factor into investing in retirement? The same principles apply to a large extent.
First of all, for both retirement and baseball, the earlier you start preparing for it, the better. You really have to think long-term. Just by saving 6% of your earnings every year means that your investment can double in 12 years. That’s right, compounding has that much of an effect on investments. Waiting until you get that special job or start earning high wages can leave you with not enough time to really get the full benefits of your investments through compounding. The sooner you start saving up for retirement, the more you’ll have when it comes.
Secondly, small details matter. An eye has to be kept permanently on the lookout for taxes and fees. Just a single percent more in fees each year can take as much as a 20% chunk out of your retirement earnings. Again there are similarities to baseball where the differences in slugging or on base percentages can be relatively small but make a major difference to player and team performance over the course of a season. Watch out for any avoidable fees and be smart about your taxes. Every percent saved builds up interest. Simply saving without tracking the details won’t cut it.
Keep the above principles in mind and you’ll most likely achieve your goal, whether it’s about becoming a baseball pro or ensuring you have enough to live on after retirement. And just in case you hadn’t figured out who’s more likely become the baseball pro: guy number two.