The parallels between managing a football team and managing an investment portfolio may not be immediately apparent at first. Yet, as our Managing Editor, Timothy Ho cleverly pointed out in his earlier article, just like a good football manager finds a balance between attacking and defensive players, a good investment portfolio should also have a mix of high-growth stocks and more stable assets like bonds and gold.
Read Also: Why Managing A Football Team Is Similar To Managing Your Investment Portfolio
But how do we find the right strategic balance in our investment portfolios? Perhaps by extending the analogy of managing a football team, we can learn something about investing from well-known football tactics.
#1 The Classic 4-4-2: Balancing Offence And Defence
Any English football fan growing up in the 90s and early 2000s would be familiar with the popular 4-4-2 formation: four defenders, four midfielders, and two forwards. This classic formation allowed a team to play offensively and defensively across the entire width of the field, leaving few gaps between players. Defenders and forwards would be specialists in their role, with the most versatile players often in midfield roles as they provided support for both attack and defence when necessary.
In investing terms, this shares parallels with the traditional 60/40 portfolio, which ironically is even older than the 4-4-2 formation. By allocating 60% of your portfolio to stocks and 40% to bonds, you balance risk and returns, mitigating stocks’ strong but volatile returns with the more positive but muted returns of bonds. Of course, to truly achieve this, you would need to focus on a long-term investment strategy and ignore market noise in the short term, such as in 2022 when both bonds and stocks suffered negative returns.
Today, while the 4-4-2 formation and the 60/40 portfolio are good starting points. they are no longer a strategy used in the top-flight, both in football and in investing.
#2 The Attacking 4-3-3: Scoring Goals, But Not Conceding Them
The arrival of the “Special One” Jose Mourinho at Chelsea FC in 2004 brought the attacking 4-3-3 formation to English football with devastating effect. The choice to overwhelm an opponent with a relentless attacking force proved too much for the League. In his strategy, half of the team was essentially an attacker, regardless of their “official” position on the pitch. The fascinating twist to this team, seemingly focused solely on attack, was that they also relied on an excellent defence. That season, the Chelsea team would win their first Premier League title in 50 years, while only conceding 15 goals.
In investing terms, this would translate to a more diverse and complex portfolio, going beyond the fundamentals of equities and bonds to include other asset classes such as commodities and private equity.
With the benefit of hindsight, a superb investment goal (pun intended!) would be investing in gold. Gold prices in US dollar per ounce increased over 80% over the past five years, and don’t appear to be slowing down.
What Modern Football Tactics Teach Us About Investing
Just as football managers develop new strategies to outwit one another on the field, the classic investment tactics require constant refining and innovation. Two popular elements of modern football can give us some insight into our own investment strategies – the inverted full-back and the gegenpress.
#3 Inverted Full-Back: The Versatile Defender
The inverted full-back, popularised by Manchester City manager Pep Guardiola, is a player who generally plays in a wide defensive position but takes on a more central attacking role when the team controls possession. The versatility of such players often creates new opportunities for the team by providing additional support for attackers.
A similar investment parallel is an asset traditionally seen as “defensive”, i.e. lower-risk and lower-reward, yet demonstrates high-growth potential. An excellent example of this would be the Parkway Life REIT. Not only has it resisted the general downward trend of S-REITs since 2021, but in the past year Parkway Life REIT has enjoyed steady growth.
Just like the top inverted full-backs in football, assets like Parkway Life REIT are rare, but once you find one, you should always have room for them in your “team”, aka your investment portfolio.
#4 Gegenpress: Be Greedy When Others Are Fearful
Gegenpress is the German word for counter-pressing, a tactic when a team attempts to win possession back as quickly as possible after losing it by playing even more aggressively. This strategy, popularised by former Liverpool manager Jurgen Klopp, sees several players press forward when an opponent intercepts the ball, swarming the opponent and pressuring them into making a poor decision.
In investing terms, this would be akin to going on the “attack” and buying stocks at a discount despite their current poor performance. In the vein of Warren Buffet’s iconic quote “be fearful when others are greedy, and be greedy when others are fearful”, the best time to look for “bargains” is when everyone else seems to be letting them go.
For example, at the most recent quarterly review of the constituents of the Straits Times Index, Keppel DC REIT replaced Jardine Cycle & Carriage (JC&C). JC&C rallied in early 2023 but has since seen share prices fall 15.45% year to date. Despite this, it is not a stretch to consider it a blue-chip stock, especially with its relatively high yet sustainable dividend yield. Buying JC&C and other bargain blue-chip stocks like it would be perfect for a “team” that employs a gegenpress strategy.
Join Us At Our EverydayInvestor Event: How To Manage Your Portfolio Like A Winning Football Team
Want to learn how to make investing a daily habit? Join us for our next EveryDayInvestor event – How To Manage Your Portfolio Like a Winning Football Team, on Saturday, 19 July, from 9:30 AM to 3:00 PM at the SGX Centre.
At this event, the DollarsAndSense team will share “Why Your Investment Portfolio Needs Defenders, Midfielders and Strikers”. The talk will explore how the principles of managing a successful football team—strategic planning, team balance, discipline and long-term thinking—can also help you build and manage a resilient investment portfolio.
We’ll also be joined by Loo Cheng Chuan, founder of the 1M65 movement, speaking on “Are You a Fair-Weathered Investor?”, and Dawn Cher, aka SGBudgetBabe who will be talking about “How To Take Back Control Of Your Money”, as well as launching her first book at this event.
Former professional footballers will share their experiences about “Beyond the Game: Financial Lessons From Being A Professional Athlete”.
Registration for this event is $5, and includes lunch, a goodie bag packed with treats, and a shot at winning exciting prizes—either at our interactive booths or in our lucky draw. Seats are limited, and registration will close once all slots are filled.
This EveryDay Investor event – Manage Your Portfolio Like a Winning Football Team, is proudly organised by DollarsAndSense, with the generous support of our event sponsors, SGX and Tiger Brokers.
Read Also: Anyone Can Be An Investor: What Type Of Everyday Investor Are You?
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