Long-distance running is a grind. It takes persistence, mental strength, and a whole lot of commitment to achieve anything remotely special. As I think about it now, long-distance running seems to share a whole lot with investing – proper, sustainable, investing. It will have its ups and its downs, the good days/weeks/months and the bad, and so on and so forth. There must always be a balance between the two. The important thing to remember is that both will be very beneficial to you over the long term, and a proper commitment to growth & improvement will reap some pretty incredible results.
With that, I think its best that we highlight some of the most important similarities between the two. Hopefully, they’ll open your eyes to the investment world, the running world, or both – and hopefully, they’ll lead to some long-term success. Here are 4 things that long-distance running can teach you about investing:
1. Staying hydrated is critical to your success
Hydration is the life-line of a runner, and without adequate water in your system, you can expect cramping, dehydration, and nausea to show up at virtually any point of a run. I’ve had it happen on short runs, and I’ve had it happen on long runs, and at no point did it do me any good. For investors, news and economic activity act as water. You need to keep up with the industries you’re invested in, the major activity of the firms you follow, and the economic shifts in your country and those closely related. It’s important to stay informed, I mean, hydrated, so that you never find yourself lagging behind. Do morning checkups on any of the several business news sources to keep yourself in the loop on what’s happening.
Now, as important as it is to stay hydrated, it’s equally important to know when you’ve had enough. Drinking too much water before a run can lead to outcomes just a bad as those from drinking too little, and so can overwhelming yourself with more external information that you actually need. Although keeping up with the latest and greatest in the business & financial world is important, the best investing is done when you can make individual, informed, un-influenced, decisions. Be sure to consume what is necessary and then move on to other, more productive tasks.
2. Run against traffic, not with it
Any weathered runner will tell you that it’s always safest to run against traffic – it’s far easier to get out of the way of something you can see. When running with traffic, you risk losing the awareness of your surroundings, getting bonked from behind, or even forgetting that danger is always present (easy to do when you become disengaged). This reminds me a lot of herd-investors, or those who simply run with the trends and see how far they can get.
An investor utilizing second-level thinking, on the other hand, will be wise to avoid following the pack. They will look for value where others do not and will find opportunities in places where they are least expected. Most, they will prevent themselves from getting trampled blindly. Second-level thinkers run against traffic in the sense that they are always aware of their circumstances and invest accordingly – they have an idea of what lies ahead, what the potential outcomes may be, and how they can best manage them. They do not, at any point, run unwittingly with the traffic because of its ease & false sense of security.
3. Understand that growth takes time, and that rest is required
Running is an art just as much as it is an activity, and my personal experience with it has been that increasing sustainable distances takes time. You can’t expect to start tomorrow with a 3-kilometre struggler and be running 10-kilometre tempo’s in a week. It will take time to train your body and get it accustomed to the skills needed for a good, sustainable run. Similarly, you can’t open up a TFSA tomorrow with $3,000 and expect to have it up to $50,000 by the end of the year. Trying to invest in such a way, or run in such a way, will surely lead to both disappointment and injury (both physically and emotionally). As an investor, you need to understand that steady growth is the best kind and that being realistic with your expectations will beget results.
Expanding on this point, I must also say that rest will be required for any true progression to take place. After a long run, you’ll need to give your body some time to heal and regenerate – constant wear will lead to rather poor long-term results. When it comes to your portfolio, you need to be able to perform your research, make an investment decision, and then leave it to handle itself. Staring at your DI account all day or checking Apple Stocks at the top of every hour will do nothing but fatigue you. Being confident in your decisions is critical to your success as an investor, and as such, you need to be able to give yourself a break (Kit Kat, anyone?)
4. Don’t wait until you’re thirsty to start drinking
Going back to the well of water references, I must mention the similarities between staying on top of your hydration levels and your portfolio activity. They say that when running a marathon, it’s crucial to drink as early and as often as you can, as the water consumed in mile 3 is actually for mile 13. Without this understanding, you’ll find yourself suffering from dehydration mid-race, and by the time you’ve started to feel like you’re dehydrated, it’s often too late.
When investing, managing your portfolio and being able to make decisions on the positions you hold (or plan to hold) is very important. If you’re holding a few companies that aren’t performing well, assess the situation and act accordingly – don’t put off the decision until later, as later may be too late. Try this: look at all of the losing positions in your portfolio and ask yourself, “if I didn’t already own this stock, would I buy it?”, and if the answer is an undisputed no, then why would you waste your time & capital continuing to hold it? You need to cut off bad positions – and drink water – before it’s too late to actually make a difference.
There are plenty of ways to take the never-ending struggles & success’ of running and compare them to the world of investing, heck, both are practically self-imposed emotional rollercoasters. These few points should help to put some new perspectives in your head regarding both. I’d have loved to keep the list going, however, I’ve gotta go out for a run before the snow comes back – 6 months and counting.