The Indianapolis 500

Drivers start your engines!

Today marks the 102nd running of the Indianapolis 500 – “The Greatest Spectacle in Racing.” Drivers will travel at speeds in excess of 225 miles per hour in pursuit of auto racing’s most iconic trophy.  The winner will average about 160 miles per hour. The 1911 winner, Ray Harroun, average speed was 75 miles per hour, slower than some current posted highway speed signs.

Race day is exciting, and the pageantry is legendary. Throngs of people pour into the brickyard to be part of the spectacle and millions more watch it on TV.  The singing of our National Anthem, “Back Home Again in Indiana”, and the stealth bomber flyover add to the enjoyment of the day.

Most of the attention will be on the 33 drivers, and rightly so, as they’ll be the ones responsible for executing the plan. However, behind them is an army of support staff including pit crews, strategists, spotters, spouses, and owners. Teams work as one to make sure the driver can win the race by strategizing and planning for a successful outcome. The plan is their road map for the race.  As the race continues, they must adjust their plan based on new data like car performance, track conditions, and weather.

In addition to a fast car and the driver’s skill, they must have a little luck to win the race. In 2011 Dan Wheldon was trailing the winner until the last lap when J.R. Hildebrand’s car hit the wall on the final turn. Hildebrand’s accident allowed Wheldon to win.  Wheldon would’ve finished second, at best, had Hildebrand not crashed.

Regardless of how fast these cars travel, the driver will pass and be passed by others. They’ll spend a majority of the 500 miles jockeying for a position to win. It’s important for them to focus on their team goals and not worry about the competition. They must put the emphasis on the process, not the result.

Prior to the start, drivers will be dissected by analysts, seers, and other prognosticators offering insight and predictions for the upcoming race – most of which won’t come true. They need to suppress this noise and concentrate on their team goals.

Unfortunately, drivers may experience a crash. When this happens the yellow caution flag will fly, and they must slow down for the clean up crew to clear the track before racing can resume. Accidents and crashes are unexpected, of course, so it’s best to try and minimize the damage.

What can an investor learn from the Indianapolis 500? Here are a few thoughts.

  • Drive your own race. People travel at different speeds to reach their goals. If you’re on the right track, don’t worry about others.
  • Create a financial plan. Your plan will help guide you through the race of your life. It will keep you grounded during all market conditions. You, like the drivers, will need to adjust it as you obtain new data.
  • Work with your team to achieve your goals. A driver doesn’t compete on their own and nor should you. A team of trusted advisors can assist you with all your needs. A CPA, an attorney, and an advisor should be on your pit crew.
  • The media and other experts will try distracting you from your plan. News headlines will make you question your investing goals so it’s best to ignore them and concentrate your efforts on following your plan.
  • Diversify your investments. In the market, like racing, crashes happen. It’s not possible to predict a crash so your best defense is a diversified portfolio of stocks, bonds, and cash. Your investments should be a function of your plan and financial goals.
  • Celebrate your wins. It’s important to enjoy the fruits of your labor. If you’ve reached a goal, celebrate it and then turn your efforts to the next one.

After 500 miles, the checkered flag will drop, a winner will be crowned, and he’ll celebrate by drinking milk and kissing the bricks at the finish line. The team will celebrate the victory for a few days and then start planning for the next race. You might not pass under a checkered flag when you’ve achieved your goals, but you’ll know when you’ve won your race.

Nothing compares to the Indianapolis 500.  ~ Mario Andretti

May 27, 2018

Bill Parrott is the President and CEO of Parrott Wealth Management firm located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process.

Note: Investments are not guaranteed and do involve risk.

 

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