One of the best moments of being a football (soccer) fan is when your team scores from long range. Although a goal built from an intricate passing move is undeniably pleasing, nothing quite beats a 25-yard rocket into the top corner. That’s why when a player finds themselves in space outside of the opposition penalty area the crowd will inevitably encourage an effort on goal with the dull roar of ‘shooot’. This is a mistake. The probability of scoring from distance is poor. It is typically a much better idea to try to work the ball closer to the goal. Shots from distance in football are like short-term investing – it feels right, but the odds of success are terrible. It is much better to do something else.

In his book on the use of data and analytics in football, Ian Graham (who played a major role in the success of Liverpool over recent years) highlighted work that showed while one-third of shots from inside the six-yard box are converted into goals, this falls to just 4% once outside the penalty area. There are several caveats to place around such numbers, but the general point holds –  shooting while being a considerable distance from goal is not usually a great decision.*

Why does this have anything to do with short-term investing? Well, trying to predict how markets might move over any brief time period (1 month, 1 year…) is another activity that we seem inescapably drawn towards despite it having little chance of success and being detrimental to what we are trying to achieve.

But why do we believe that long range shots and short-term investing are better ideas than they really are? Because of the influence of some of our most impactful behavioural foibles:

– We remember the wrong things: Our judgement of probability is inextricably linked to how available something is in our mind. Goals from long range shots don’t seem anywhere near as rare as they are because they are salient and we see them repeated continually, much more so than those that fail to hit the back of the net. Similarly, it is far easier to remember those short-term market calls that we got right, than the many we got wrong.

– We want a near-term fix: We prefer things that are exciting and give us a reward as soon as possible. Long range shots and short-term investing are far more stimulating than their alternatives, both of which require a great deal more patience and are just a little more dull.

– We want to be part of the crowd: Most people in a football crowd will urge the player to take the long shot, why would we not want to be part of this? Likewise, most people in the investment industry want us to engage with short-term market activity, so most of us do. Norms matter.

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There are situations where taking a long shot might be a prudent option. For example, a weaker team playing against a much stronger team my not get that close to their opponent’s goal so an effort from distance is their best chance. Yet even here the the similarities with investing are stark – speculation can only be justified when our objectives are speculative.

The further we are from goal when taking a shot the greater the uncertainty, the more other variables will get in the way and the lower the probability of success.   

The shorter our investing time horizon the greater the uncertainty, the more other variables will get in the way and the lower the probability of success.

Enjoying and encouraging a shot from long distance in football is entirely understandable and perhaps desirable. Football is entertainment – it is about moments and feelings – ignoring what the data tells us is fine, it might even make the game better. Most of us don’t invest for fun and, unless we do, we should avoid the long shot of being short-term.

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* These numbers are a simple representation of what the data tells us. There are a range of other factors that will impact the probability of scoring from various parts of the pitch, such as the relative strength of the teams involved, the player taking the shot, how easy it is to get the ball closer to the goal etc.. Such things are always noisy, but the point about long shots being overrated (from a data if not enjoyment perspective) still stands. There has been a reduction in long range shooting in high level football in recent years no doubt in part due to the increasing use of analytics.

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My first book has been published. The Intelligent Fund Investor explores the beliefs and behaviours that lead investors astray, and shows how we can make better decisions. You can get a copy here (UK) or here (US).