Unforced Errors

I admit I am only a casual sports fan…I watch NBA finals, the Super Bowl, Grand Slam tennis. But in watching the recent Grand Slam (fascinated with Serena Williams…), I was interested in what the announcers called “unforced errors”. These are the mistakes a tennis player makes that are not forced by the skill or awesome play of their opponent. In other words, the player defeats themselves—either they have a mental lapse or the split second decision they made was just wrong.

Interestingly, the concept of unforced errors applies to the financial world as well. If we were able to correctly process all known and relevant information about our money, we would never make mistakes. We would buy low and sell high. We would have just the right amount of life insurance. And we would never, ever have credit card debt.

But, we aren’t perfect processing robots. Just like in tennis, we are in the position of making decisions quickly that can be clouded by things like emotions, confusion, or distraction. We can make unforced errors simply by being humans.

Even the best investors struggle with unforced errors—the great Oracle of Omaha, Warren Buffet, even admitted he made a “big mistake” when he bought $2 billion of energy bonds issued by a Texas energy company. Buffett was betting big that natural energy prices would rise, and unfortunately he was wrong, ultimately losing $873 million on the deal. In his annual letter, he writes that he made the investment without consulting his longtime partner which deeply regrets.

We think Buffett’s acknowledgement of the importance of a second opinion is key—consulting with advisors you trust can often prevent unforced errors. At Meridian Financial Partners, we help our clients sort through financial decisions to minimize these unforced errors—because each error adds up and can be the difference between success and regret. Contact us anytime you need a second opinion on your financial choices!