Roger Federer: A study in investing excellence

Federer's glorious career was raised on patience, persistence and perspiration. The same way long-term wealth is built.

Roger Federer: 5 investment lessons to learn from the all-time great

All of us saw it coming. But when it finally did, no-one seemed prepared for it.

On September 15, news came in that tennis great Roger Federer was calling it curtains on his decorated 24-year-long career. Twenty-four years of top-level tennis! 20 majors, world number one for 310 weeks (almost six years), a record eight Wimbledon titles...the list goes on. A career likened to a religious experience; a playing style as elegant and graceful as a swan gliding on a lake. But what is hidden from public view is the furious, maniacal paddling of the swan's feet underneath the water that makes it look so glorious.

And so it is with Federer. It wasn't all smooth sailing for him either - just like it isn't with our investing journey. So, let's see what lessons we can take from Federer's career to help shape our investment strategy.

Federer turned professional in July 1998, a few weeks after India carried out its first nuclear tests and a few weeks before Gunda hit the theatres.

His career spread across an astonishing four decades and two millennia, which means it took those many years to collect 20 grand slams, eight Wimbledons and so on. If you look at the cold stark numbers, he won less than one grand slam a year, one Wimbledon in three years and was the number one player in the world for less than 25 per cent of his playing career. These numbers may seem reductive, but it goes to show that he didn't have it all his way in his long, illustrious career.

It's the same with investing. Longevity is the key. The best way to accumulate wealth is to spend time in the market and not by timing it. It wasn't like Federer's career was a photo-reel of great days. Just like all of us, he had good days and bad (circa 2009 Australian Open or the 2019 Wimbledon final). Similarly, investors have to ride the peaks and troughs of the market to accumulate wealth.

Let's understand the importance of spending time in the market - and not timing the market - with this example. Say you bought the Sensex on January 3, 2000 (the first trading day of 2000).

Now, let's assume you didn't want to withstand the low phases of the market and tried to time it instead. In your attempt to second-guess the market, you missed the top-10 performing days between January 3, 2000, and December 31, 2021. Your return over the period would be 7.4 per cent. In contrast, staying invested throughout these 21 years would have fetched you 11.4 per cent returns (excluding dividends).

That's huge. If you had invested Rs 1 lakh, that number would have grown to Rs 10.8 lakh, which is Rs 6 lakh more than if you missed out on the 10 good days in the market!

Know yourself
Federer's initial years were an ugly whirl of anger, tantrums and smashed racquets. As precocious a talent he was, observers questioned his mental toughness.

It took him years to toughen up, something he has openly talked about in the past: "I think I had a long process. Took me, I'd say, almost three years to figure myself out on a court."

Once he switched on, success followed in spades.

'Knowing yourself' seems very cliched, but it is the first step to succeed in the world of investing. Only if you know your risk profile can you employ your money in the right investment option. A safe investor - who is unable to stomach market volatility - should ideally invest more in debt, while an aggressive investor may eye a larger equity allocation.

In the autumn of his career, Federer skipped the French Open most years. He felt his knees might not be able to withstand the rigours of the physically-demanding clay-court tennis. It was a painful decision, but he felt it was the only way he could extend his career and give himself a better chance at his beloved Wimbledon.

Similarly, you need to prioritise your goals. There may be temptations of various kinds, the urge to splurge, but you need to weigh what's important in the long run. It's your focus that will determine your reality and future.

Ignore the noise
The first drumbeats of retirement were sounded way back in 2009 - and it only got shriller with each loss.

Imagine if Federer had paid heed to his critics? He'd be robbed of five major titles. Five!

That's similar to you losing a chunk of your investment because you were a sucker for people's advice. So, beware of the market noise. It compels short-term thinking and promotes over-reaction - two ingredients that can turn good money bad.

Exaggerations aside, tennis was a different sport when Federer turned pro. It was an era of lightning-fast courts, booming serves and slashing volleys. Having grown up watching his idols on telly, Federer's game was a configuration of those times.

But TV dictated that the game be slowed down to make it more viewer-friendly. As a result, the court speed changed, necessitating players to retool their game.

And Federer did just that.

Just like he is equally adept at playing on fast and slow surfaces, our investment portfolio should be an all-weather, well-balanced portfolio, a perfect blend of yin (debt) and yang (equity) - each of which can counter different market conditions.

That said, the ying and the yang will have to take a breather as Federer has rocked up in London this weekend for his last hurrah. But amid the pomp and celebration, what should not be forgotten is the furious, maniacal paddling behind the scenes that built his illustrious career.

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