Dear Fellow Investors,

“It breaks your heart. It is designed to break your heart. The game begins in the spring, when everything else begins again, and it blossoms in the summer, filling the afternoons and evenings, and then as soon as the chill rains come, it stops and leaves you to face the fall alone. You count on it, rely on it to buffer the passage of time.” ― A. Bartlett Giamatti

As we enter April, baseball comes to mind while the Major League Baseball Season begins. Commissioner Giamatti’s thoughts are apropos and reflect on baseball across the seasons of the year for players and the fanatics of the sport. Baseball carries many similarities to investing. There are a myriad of investment opportunities among stocks, bonds and other investment products much like there are thousands of events in a baseball season like plate appearances, outs and runs. The one constant in the investment world and baseball is change. Change during the year. Change over the years.

Both games reset all the time, asking the competitors on the field to bring their highest level of competition. There is the excitement of twilight in the summer and success in investment holdings. There can be disappointment at the end of most seasons in the fall and sometimes poor investment results. Both are part of the constancy of the games. For baseball fans, they have a team or a player they root for. However, in the world of investing, some advocate for an approach of not trying to root for or own a winner. The urge to passively participate in investing without a team to root for lies in industry jargon like volatility and risk-adjusted returns, but do those views on investing ever spell outright success like a World Series Championship or a Hall of Fame induction?

A Player to Own

Ted Williams is regarded as one of the greatest hitters in baseball history. Williams’ batting average in 1941 was .406. For non-baseball enthusiasts, a batting average above .300 is widely regarded as above average. That 1941 season was the last year a player has hit over .400! In hindsight, it is easy to evaluate the success that Ted Williams had during the 1941 season, but was it easy to sit through as the owner of his contract?

The 1941 season was only Ted’s third in the major league. He didn’t have a large body of work to prove his prowess as a great hitter. He started off the season with an injury that nagged him and as he saw more at bats in early May, his batting average plummeted to .310 for the season. A change in batting average like that sounds like a lot of volatility for an outstanding hitter to have. At that point in the season, the naysayers were probably assuming the worst for Ted’s batting average. However, by the close of the season, he had produced a most remarkable year.

Owning a Great Season vs. Owning a Great Career

Williams’ career is one of consistency, but it was not one without stumbles. He followed his 1941 season batting .356 in 1942. The owner of the team had to continue to feel good about his ownership of Williams’ contract. This all ended as Williams went to fight in World War II, missing three seasons from 1943-1945. After the war ended, Williams picked up where he left off, batting .342, .343, .369 and .343 in the four years that followed.

In 1950, Williams’ games were limited by injury, batting only .317 that year, a far cry from where his career had been up to that point. How did the owner feel about his lack of production that year? There was a lot of “volatility” in his plate appearances and batting average. He returned in 1951 to a full season of games, but still didn’t hit near as well as his prior years and finished the year hitting .317.

Prior to the 1954 season, Williams had missed parts of five seasons to the military, one season to injury and in his last full season (1951) had one of the lowest batting averages of his career. What is an owner to do? Frustrating? Yes. Did this make it pointless to continue on with Ted Williams on your roster? Indexing probably looked very attractive at this point.