Wayne Gretzky and Investing

Even if you’re not a hockey fan, you’ve likely heard this quote from Wayne Gretzky:

"I skate to where the puck is going to be, not where it has been."

Now, correct me if I’m mistaken, but I have a hunch that if you’ve heard the above quote, you didn’t immediately conclude that Mr. Gretzky is able to see the future.  Why would you?

Yet why is it that the vast majority of people subscribe to the idea that Jim Cramer and the crowds of other stock-picking active managers think they can “… skate to where the puck is going to be, …” when picking investments?

I think, in this example, we’re talking about two completely different issues.  Gretzky demonstrated over his impressive hockey career that he has a feel for the game and was generally successful at anticipating where he needed to be on the ice.  But for anyone to interpret his quote to mean Gretzky felt he could see what was going to happen before it actually happened is ludicrous.  I mean c’mon … we’re talking about hockey — a physical and fast-paced sport.  There’s no way Gretzky or anyone could predict what would happen.

But imagine if you put Gretzky in a nice suit and changed his quote just a bit.  To help your mental image, here’s a picture of him in a suit.

Now let’s image Mr. Gretzky said something like this:

I invest where the market is going to be, not where it has been.

Based on the modified quote above, now do you think our friend Wayne can see the future?

I don’t.  In fact, I don’t believe anyone can predict the future whether it’s with regards to investing, hockey or anything else.

Yes, it’s the same hockey playing guy we were talking about earlier.  All we’ve done is changed him out of his hockey uniform and into a suit.  We tinkered with his quote a bit, too.  Other than that, nothing’s changed.

And The Point Is

Why is it that we’re so eager to believe people armed with little more than a nice suit and maybe a fancy business degree can predict the future about anything, especially our investments?

I’m serious … why is that?  I just don’t get it.  Do you?

We’re talking about your hard earned savings and investments, your future retirement, your children’s education fund and other goals and objectives that are important to you and your family.  Are you willing to risk all these things on the hope that someone, maybe yourself, can display Gretzky-like skill in maneuvering the investment markets?

Not me. 

I prefer to get my entertainment by watching hockey or through other pursuits, and would rather let my investments take a more prudent approach by owning the entire market through low-cost, passive investment vehicles.