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Speaker 1: You're listening to the Saturday Morning with Jack team podcast

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Speaker 1: from News Talks, that'd be.

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Speaker 2: Time to catch up with our personal finance expert. Ed

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Speaker 2: McKnight from Oby's Partners is with us this morning talking sport,

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Speaker 2: which I know sounds confusing.

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Speaker 3: Kielder, Ed, great to be here, Jack.

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Speaker 2: Great to be speaking with you. They call it the

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Speaker 2: Roger Federer effect. When I think of Roger Federer, I

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Speaker 2: think of maybe the most fluid and beautiful tennis player

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Speaker 2: of all time. But you think of something very different.

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Speaker 3: Indeed, well, what's quite funny, Jack. I was on my

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Speaker 3: treadmill walkie away watching some YouTube videos that I saw

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Speaker 3: this really interesting speech that Roger Federer gave at Dartmouth College.

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Speaker 3: He was up there in the full dress, said he

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Speaker 3: shared a stat that really blew my mind. Now we

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Speaker 3: all know Roger Federer is one of the greatest tennis

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Speaker 3: players of all time. He won over eighty percent of

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Speaker 3: the singles matches he played. But then he asked this question, Well,

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Speaker 3: if I won eighty percent of the matches, how many

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Speaker 3: points do you think I won in those over a

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Speaker 3: thousand singles games. Now most of us would say, well,

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Speaker 3: surely it's got to be eighty percent, but it actually

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Speaker 3: wasn't It was fifty four percent of points. And I

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Speaker 3: promise you that this has a money related effect.

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Speaker 2: Yeah, that's very very interesting, isn't it? So fifty four

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Speaker 2: He only won fifty four percent of the points. When

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Speaker 2: I think about the structure of tennis and I think

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Speaker 2: about the kind of the statistical side of tennis, I

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Speaker 2: suppose that tennis, while it has a set number of sets,

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Speaker 2: there's no guarantee as to how many points will be played. Right.

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Speaker 2: You can win a game by being up forty love,

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Speaker 2: or you can win a game by being at tiebreak.

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Speaker 2: But I suppose at the end of the day that

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Speaker 2: the important thing is that you win a majority of points.

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Speaker 2: And if you win a majority of points, you end

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Speaker 2: up probably winning games. But that's a huge discrepancy.

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Speaker 3: Well, here's how the stats work. If you win fifty

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Speaker 3: four percent of the points, then you win around sixty

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Speaker 3: percent of the games, right, And if you win sixty

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Speaker 3: percent of your games, you win around seventy three percent

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Speaker 3: of your sets. And if you win seventy three percent

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Speaker 3: of your sets, that compounds into winning about eighty three

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Speaker 3: percent of your matches. And look, if you win eighty

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Speaker 3: three percent of your matches, you become Roger Federer and

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Speaker 3: you're a world class champion.

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Speaker 2: I was going to say, and you took that word

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Speaker 2: off my tongue, compounding right.

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Speaker 3: Well, when I heard that Statujack, that's what I was like.

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Speaker 3: That is a depth how investing works. Because sometimes people

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Speaker 3: say to me, Ed, you talk about how shares and

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Speaker 3: property tends to go up over time, But then I

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Speaker 3: look at my shares ees app and it looks like

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Speaker 3: half the time the shares go up or McKee we

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Speaker 3: savor goes up, and half the time the balance is

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Speaker 3: going down. And it made me realize that if we

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Speaker 3: take the F and P five hundred, it only goes

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Speaker 3: up fifty three percent of the time on a daily basis, right,

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Speaker 3: which means you've always got a coin flip chance on

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Speaker 3: any given day that the market's going to go up

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Speaker 3: or the market's going to go down. But that compounds

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Speaker 3: into sixty three percent of the time the S and

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Speaker 3: P five hundred goes up in a given month, or

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Speaker 3: sixty nine percent of the time in any quarter, and

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Speaker 3: if you look over a year, it's about seventy four percent.

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Speaker 3: And the longer you go out the higher, that number

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Speaker 3: goes up. And so when I one of the things

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Speaker 3: I often say to invest is the money is made

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Speaker 3: in holding. But if you're investing for the first time

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Speaker 3: and you put some money in and then the next

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Speaker 3: day you run back to see how much you made,

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Speaker 3: and oh, gosh, half the time it's going up. Half

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Speaker 3: the time it's basically going down. You can't distinguish that

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Speaker 3: you've got a slight edge. But the money is made

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Speaker 3: in the holding. And if you look back over a

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Speaker 3: year and you go, oh, seventy four percent of the

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Speaker 3: time I'm actually making money, that can make you start

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Speaker 3: feeling better. But it's just to say that you're not

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Speaker 3: going crazy. If you're regularly logging it on a daily

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Speaker 3: basis checking your shares or on a monthly basis into

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Speaker 3: your ain z as, checking the value of your property.

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Speaker 3: You're not going crazy if you see it going up

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Speaker 3: in down a lot on that short term, because you've

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Speaker 3: got to zoom out over the year or the five

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Speaker 3: years to see, oh yeah, this investing thing does work.

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Speaker 3: So just keep in mind that Roger Federer effect. It's

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Speaker 3: the same in tennis as with your investment.

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Speaker 2: It's funny how human psychology is such a funny thing, right,

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Speaker 2: But we can all rationalize that with investments, things go

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Speaker 2: up over the long term. And yet still if you

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Speaker 2: log into your key we saver and you've lost a

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Speaker 2: couple of percent overnight and you see that as several

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Speaker 2: thousand dollars, even if you're not going to be realizing

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Speaker 2: that that gain or that loss for years or decades

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Speaker 2: to come, you still feel a bit stink. It's just weird.

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Speaker 2: It's a weird kind of dynamic.

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Speaker 3: Especially when you see shares. Is it happens more with

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Speaker 3: shares them with property because the price of shares of

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Speaker 3: the S and P five hundred changes every single day,

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Speaker 3: and so you can see that happening. And it's so

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Speaker 3: easy to get despondent and feel like, oh, gosh, I

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Speaker 3: won money this day, or I made money this day.

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Speaker 3: I did it the next day. But just keeping in mind, oh,

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Speaker 3: it's the same with Roger Federer. You wouldn't look at

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Speaker 3: him playing a single game and think, oh, he's a

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Speaker 3: bit use. It's the only wins about half his point. No,

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Speaker 3: he's a world class tennis player. You can't just look

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Speaker 3: at the single point. It's to match that matters, and

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Speaker 3: it's the same with your investing.

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Speaker 2: Oh that's so good. Love you work here. Thank you

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Speaker 2: so much to have a good weekend.

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Speaker 3: You two.

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Speaker 1: For more from Saturday Morning with Jack Tame, listen live

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