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Economy , Investing

Don’t Be A Cherrypicker

August 27, 2019
Don’t Be A Cherrypicker

“Offense wins games… defense wins championships.” -Bear Bryant

Cherrypickers used to drive me nuts. They’d get cheers from the crowd, pictures on the front page of the paper, and they’d rack up their scoring statistics.

Unlike soccer or hockey, water polo does not have an ‘offsides’ rule. That means that a player can intentionally sit on the offensive side of the pool, just waiting for someone to pass them the ball so they can take a shot on goal.

Players who do this are known as cherrypickers. They purposely put themselves in a position where they have an extreme advantage of making a goal. Basically, they are able to take a shot on goal with just a goalie. Imagine throwing a large ball fifty miles per hour, at a goal that is ten feet away from you… the goalie has little chance of making a block.

Don’t Be A Cherrypicker

However, the huge problem with being a cherrypicker is that you aren’t playing defense. Yes, you will get all the glory when you score, but on the other side of the pool, you’re letting your entire team down by not helping them.

As a water polo player all throughout high school and college, I would personally call out teammates for doing this. Being a cherrypicker is not only a selfish strategy, but it’s also a huge slap in the face to the rest of the team. Essentially, a cherrypicker is making themselves look great, while the rest of the team picks up their slack.

Basketball is another sport where you can do this, and there are dozens of professional players who are guilty of being cherrypickers. Their statistics at the end of the game might include a lot of points scored, but there are no blocks, steals, or assists to count for.

If you’ve ever wondered why some professional athletes are hated by their own teammates, this is the exact reason why. Cherrypickers receive all of the praise and notoriety because of the support of their teammates, but that same cherrypicker is also responsible for letting the rest of their team down.

The investing world has a lot of these same players, especially during bull markets, which we have been in for the past ten years. Investment cherrypickers are the ones you hear about towards the end of a bull market. Do you remember what was going on around 2007?

Just watch the movie The Big Short, if you don’t remember. Real estate investors were making money hand over fist and just loved rubbing their success in other people’s faces. Of course, when 2008 came along, these same investors got caught with their pants down and lost almost everything they owned (or more!).  Don’t Be A Cherrypicker

Now, there is nothing wrong with being successful during a bull market. When there is opportunity, you have to take advantage. However, you also have to be aware about how to protect those gains, or else you can end up like those real estate investors after the housing crisis.

Unfortunately, making smart investment decisions towards the end of a bull market just feels wrong. Shifting your gains from opportunities where you have made great profits towards opportunities that are boring, lower yielding, and just plain unsexy is a hard decision to execute.

But, just like defense in a sports game, it’s the right thing to do. Playing smart defense will allow you to live another day, when you can shift your strategy to offense when the opportunity arises.

That’s one of the reasons why we are now investing in Colombian real estate. In addition to having attractive annual yield, we’re also investing in assets that are selling for less than their replacement cost.

Furthermore, we’re also exposing ourselves to annual capital appreciation, currency diversification, and we’re taking some of our portfolio outside of our home country, which is the ultimate way to diversify your portfolio.

We’re not the only ones doing this. Many major companies are now buying up massive amounts of foreign real estate. They are putting their money into assets which will track inflation and also allow them to diversify their risks of holding assets or currency in their home country.

In the United States, major companies are also buying real estate. Starwood Capital just bought thousands of rental units across Florida and Texas as a way to diversify their holdings for the coming years (wonder what Starwood is predicting… perhaps they’re shifting their big gains towards reliable, but unsexy yielding real estate?).

Just like being a cherrypicker, the biggest damages can come after a big score. So make sure you’re positioning yourself now to protect what you’ve worked so hard to gain.