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I’m a Liverpool Football Club (LFC) supporter since the early 90s. Non-LFC fans fear not, this post is not about the club or its history. It’s about how supporting your club emotionally over the years can be a poor trait when it comes to long term investing.

Noise

Supporting a football club during good days are easy. Supporting a football club during bad days are hard and terrible. Years ago, my weekly mood was pretty much dictated by the LFC team’s result over the weekend. When the team wins, it’s all smile but when the team loses, you are totally down.

To make things worse is when the opposing team wins and their supporters start making fun of you and your team. I can take a banter but sometimes banter turns into an ugly confrontation, even with close friends, family members and colleagues. Everyone is sensitive and edgy when it comes to supporting their club. In football, no one gets the last laugh. Today I laugh at you, tomorrow you laugh at me. It’s a never-ending cycle.

This cycle is what I consider as unnecessary noise. If you give enough attention to it, the noises will affect your emotion and cloud your judgment. When it comes to investment, you will be presented with these noises in the form of constant market news, analyst/economist reviews and sometimes from the opinion of unknown or not credible sources. Some will be “bullish”, and some will be “bearish”. These noises can be conflicting, irrelevant and at times confusing. Do not make any emotional buy or sell investment decision based on these noises as they can affect your investment return.

Crisis

Back in October 2010, LFC was one day away from entering administration or bankruptcy. The previous owners had difficulty servicing £237 million debt taken from Royal Bank of Scotland (RBS). This was the biggest crisis the club had gone through in recent history. The financial problem at the management level was directly affecting the performance of the players and the team. To avoid administration, the club board had to find a suitable buyer.

As a supporter of the club, I still remember how nervous and anxious I was back then, continuously refreshing online sports page, hoping there will be an announcement of a new owner. I can’t imagine the club going into administration and not competing at the highest level. It’s not until 6^th October 2010, when it was confirmed Fenway Sports Group (FSG), formerly known as New England Sports Ventures (NESV) agreed to buy and take over the club for good. A sigh of relief after years of prolong saga.

Objective

During the crisis, supporters are constantly bombarded with negative coverages. At times it would feel the end is coming and there is no hope. Like most supporters, you feel like giving up, but you always fall back to the objectives of supporting your club through thick and thin. You know there will be better days ahead.

Like any long-term investment, whenever there is an economy or market crisis, our natural tendency is to immediately cash out our investment. I’ll admit, emotionally this is hard to go through. Seeing my investment return goes into negative territory and drops further is a terrible feeling. However, instead of cashing out, we should remind ourselves of the objective of the investment. If the investment goal or objective is for retirement, then it is meant for the long term and there will be ups and downs along the way. The key here is not allowing current negative news or events to cloud your long-term investment objectives.

Not related, but I previously shared a risk management strategy to counter this scenario. You may refer it by clicking here.

Progress

With new owners, comes new and heavy expectations. Majority of the supporters and the media were hoping for quick fixes and progress. As expected these were unrealistic expectations in a short period of time and it didn’t take long before the blaming game begins towards the club management. To be fair, there were some missteps taken by the management too. There were times it felt like 5 feet forward, 1 foot backward and other times 1 foot forward, 3 feet backward.

It took the new owners close to 9 years to win the first major trophy. Some would say the progress was slow but that is the thing with progress, it is not always linear and visible. Growth or progress grows exponentially through compounding. It needs time and it must go through good and bad times. Emotionally it can be tiring but patience and perseverance are the key components of progress and these are the two main attributes required by long term investors.

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