What I Learned About Personal Finance From Boxing and MMA

I have spent the last 14 years of my career as a Wealth Manager and a Financial Planner. I am also an avid boxer, and in my spare time teach instructional boxing at a local MMA gym. My hobby did not help me much in my work, or so I thought. Unlike golf, tennis or yachting, boxing is rarely associated with finance. No adviser, to my knowledge ever took a client for an afternoon in the ring. Reflecting back, however, I believe no other sport can teach you about investing what boxing can. Here are some of my observations which may help you to become if not a better boxer, at least- a more successful investor:

• “The most counter-intuitive sport on earth” – In a movie ” Million Dollar Baby” Clint Eastwood’s character Frankie famously said “Boxing is an unnatural act, ’cause everything in it is backwards. You wanna move to the left, you don’t step left, you push on the right toe, to move right you use your left toe, instead of running from the pain like a sane person would do, you step into it. Everything in boxing is backwards.” Successful investing feels just as unnatural. Often an investor has to turn off his natural instincts and buy when he really feels like selling everything is the right thing to do. The same instincts that wire us for survival make us poor investors. Following the crowd, moving away from pain and towards pleasure, giving in to herd instinct may makes us a more successful species, but a poor investor.

• “Sometimes best way to deliver punches is step back. But step back too far, you ain’t fighting at all” is another quote from the same movie. Or as I tell my clients ” doing nothing is also an investment choice” . Sometimes the best investment is the one you have not made. However, waiting for too long for the right investment opportunity to come along may cause an investor to miss out on gains ( known as “opportunity cost “)âÂ?¦step back too far, you ain’t fighting at all”. Hopefully those quotes from the “Million Dollar Baby” will set you on path to make a million dollars of your own.

• “Fighter’s mentality”– Boxing and MMA coaches often talk about a “boxer’s mentality“. It is not enough to learn the proper techniques, footwork and defenses. A successful fighter also develops a “boxers mentality” where they embrace the fight, treating it like both an physical and an intellectual challenge; where they no longer fear getting punched, nor get angry but aim to execute what they learned with perfect form. A successful investor also possesses a special kind of mentality, where they succumb to neither greed nor fear, but rather execute a well-planned strategy.

• Punch Strength – A boxer’s punch is considered the strongest across all fighting sports. The key to power lies in how all body parts work in sequence in delivering a knock-out blow. The punch starts at the toes, traveling through boxer’s legs, hips, back, arms and only then culminating in the knuckles. Combined with perfect timing in delivering and landing the punch, it stings like no other. It is not the brute muscle strength, speed or weight of a boxer that matters most , but the balance and perfect execution of all muscle groups working is concert. Same can be said about the properly-executed investment plan- it is not enough to have a good collection of investments in your portfolio- They have to work in concert, improving a portfolio return and hedging risks.

• Moving into the punch – A good boxer knows very well that moving into the punch (as opposed to away from it) minimizes the chances of getting hurt. While the body’s instincts tell it to rock back, the experienced fighters trains themselves to “lean into the punch” . An experienced investor knows this principle well and often “buys the dip” or continues to ” average down” in a declining market, or holds on to a position, sticking to the plan, despite his instincts, which may tell him to ” take the money and run”.

• Practice makes perfect – Learning boxing can a tedious activity. Boxers are thought to repeat the same drill over and over until it becomes a reflex. Doing so frees up their mental faculties during the fight to think of strategy, and not the mechanics of throwing a proper hook or an uppercut.

The similarities go on and on, I could write more about never entering a ring without a game plan, or rising early (to go for a run or for the market open), but I will stop here. Hopefully those tips will help you inside and outside the ring.