On a recent trip down the Historic Kentucky Bourbon Trail, I attended a brunch at Woodford Reserve Distillery in Versailles, Kentucky. The featured speaker at the event was Ellis Starr, one of the worlds’ premier horseracing handicappers. The distillery had brought Mr. Starr in to discuss the finer points of wagering at the track for the many attendees planning on spending the day at Keeneland.
Being a horseracing novice, I was intrigued by what Mr. Starr did for a living. In short, people interested in betting on horseracing will actually pay for Mr. Starr’s advice. Race tracks will also hire him to pick winners and losers for their in-house television networks that are broadcast to track patrons, off-track betting facilities and home satellite services.
As he talked about how to read a program and analyze each horse, the overall conditions of the track, the quality of the jockey and past performance of the horse, it dawned on me how similar these methods were to actively managing an investment portfolio. Was there really a method I could use to beat the odds at the track and expect better than average returns on a regular basis? There must be some hidden piece of data lurking in the race program that only I could see the right way.
Analyzing all the statistics surrounding various horses, much like investments, feels like the right thing to do. Unfortunately, the truth is whether at the track or on the trading floor, countless variables are at work that cannot possibly be interpreted with any regularity. Horses, like stocks, are going to behave however they choose to once they get out of the gate and are free to run.
My trip did not take me to Keeneland that day, but I did go back to review that day’s results as compared to the expert analysis. Much like the stock picking program offers that fill my inbox each day, a broker’s hot tip, or even my good friends on CNBC, I was left disappointed. In not one instance was the winner selected with any degree of certainty. There were a few picks that, if wagered properly, could’ve been winners, but knowing when and how to place that well timed wager would have been a gamble all its own.
What’s more, I got to hear this analysis for free. Most folks, just like in the investing examples mentioned above, pay for expert advice. This is not to disparage horse handicapping in any way, but rather to revisit that tried and true ideal that if something seems too good to be true, it probably is. No investment strategy, whether betting on the ponies or the stock market, is a guaranteed winner. It doesn’t make financial sense to bet on every horse, but, fortunately, you can bet on virtually every company in the world market and ensure that, over time, you’ll have more winners than losers.
As we come down the stretch of the investing year, now is a great time to evaluate how you choose to invest. Is it a thoughtful plan based on your appetite for risk and meeting your needs in retirement? Is it being carried out by professionals with no conflicts and only your best interests in mind? Or, are you simply spending day after day at the race track that is Wall Street, leaving your money in the hands of folks that continue to sell you products and advice based on a promised level of expertise that they simply do not have?
Wagering on a race here and there can be a lot of fun, but I wouldn’t bet my retirement on it.
By Chip Workman