3 powerful lessons long-distance running can teach us about successful investing
27/05/2022While it may not be immediately obvious, there are many similarities between long-distance running and successful investing. Find out about three of them.
If you are a recent entrant into the world of running, data suggests you certainly aren’t alone. According to RunRepeat, running took off in popularity across the globe in the decade up to 2021.
Of course, as running was one of the ways you could leave the house during the Covid lockdowns, it’s not surprising that nearly 30% of new runners started during the pandemic.
You might be one of them, and if you are, you could now be in training for one of the many marathons and half-marathons that are being held across the UK.
While it may not be the most obvious of connections, endurance running provides some excellent lessons for successful long-term investing. Read on to discover three of them.
1. Know what your goals are
Most of those who run do so to achieve a personal goal, whether that’s simply to make it to the finish line or to achieve a best time.
Whatever the reason, you should not be worrying about what the other runners are doing as this might change your race strategy and stop you achieving your goals.
This is typically the same with investing. Someone who would know is Warren Buffett, the chairman of Berkshire Hathaway and one of the world’s most successful investors of all time. He is also famous for his insightful quotes, one of which relates to this very point.
In 2016, Buffet said: “buy, hold and don’t watch too closely”. His remarks referred to how investors can potentially react to stock market movements, which are driven by the actions of other investors.
By taking a step back and not being too concerned about the short-term performance of the stock market, it’s less likely that you’ll make a knee-jerk decision that you later regret.
2. Focus on your end goal
Long-distance running is always about putting the long-term goal ahead of the short-term obstacles. Speak to any experienced marathon runner and they will probably tell you they’ve “hit the wall” during races, which is when fatigue and the anxiety of not finishing reaches its highest.
Usually, it happens during the middle of the race, and is the period when most runners decide to quit.
The ability to focus on long-term goals when the market suffers short-term volatility is key to successful investing. This is echoed by another well-known Buffett quote, which is: “if you don’t feel comfortable owning a stock for ten years, you shouldn’t own it for ten minutes”.
Holding on to your investments when others decide to sell means that your money has the potential to bounce back and even grow when the markets later recover. To demonstrate this, consider the following illustration, which shows the FTSE 100 index between January 2021 and May 2022.
Source: London Stock Exchange
As you can see from the values on the right-hand axis, the index rose in value despite many downturns along the way. If investors had sold stocks and shares during these downturns, their money could have missed out on the subsequent growth that followed.
Always remember, past performance is no guarantee of future performance.
3. Be patient
It’s highly unlikely that anyone could put on a new pair of running shoes and complete a half-marathon or full marathon without any preparation. If they could, they would probably do themselves a physical injury!
Every seasoned marathon runner knows it takes time to build up to long-distance races which, in turn, means having patience. Being able to see the training schedule as a long-term strategy that builds up distance is key to being a successful marathon runner.
Likewise, patience is typically behind successful investing. The fact that investors should give their investments plenty of time to grow, and not treat them as a get-rich-quick scheme, was highlighted by Buffett, when he said:
“Successful investing takes time, discipline, and patience. No matter how great the talent or effort, some things just take time: You can’t produce a baby in one month by getting nine women pregnant.”
To demonstrate the wisdom of this, you might want to consider research by Nutmeg, which found that holding an investment for 13 years or more reduces the probability of loss to almost zero.
Get in touch
As a client of Douglas White, you have peace of mind that we’re on hand to help and coach you, to ensure your money is working as hard as possible for you. That’s why we have strategies in place and carry out reviews with you to ensure that your finances are in tip-top condition and will last for the long haul.
If we feel they are lagging behind the pack, we will always provide you with options to ensure your investments are on track to meet your goals, in a way that’s as tax-efficient as possible.
That said, if you’re not a client and would like to discuss investing, or you are a client and feel we could help a friend or family member, please contact us. Either email info@douglaswhiteltd.com or call 0151 345 6828 to find out how we could help.
Please note
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
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