Special to the Financial Independence Hub
The 2016 Summer Olympics is just getting under way in Rio de Janeiro. One of the most compelling events is the marathon, a 42-kilometre endurance contest with roots dating back to ancient Greece. It may be that we’ve kept our interest in the marathon because it can teach us much about life – and it certainly has lessons for investors.
In fact, if you were to compare investing to an Olympic sport, it would be much closer to a marathon than a sprint. Here’s why:
Sprinters are unquestionably great athletes, and they work hard to get better. Yet their events are over with quickly. But marathoners know they have a long way to go before their race is done, so they have to visualize the end point. And successful investors, too, know that investing is a long-term endeavor, and that they must picture their end results – such as a comfortable retirement – to keep themselves motivated.
Sprinters go all out, every second and every stride. But marathoners have to pace themselves – too many spurts of speed could tire them out and doom their performance. As an investor, you, too, should strive for steady, consistent progress. Rather than attempting to rush success and achieve big gains by chasing after supposedly “hot” stocks – which may already have cooled off by the time you hear about them – try to follow a long-term strategy that emphasizes diversification among many different investments. (Keep in mind, though, that while diversification can reduce the impact of market downturns that primarily affect one type of asset, it can’t guarantee success or prevent all losses.)
Ability to overcome obstacles
When sprinters stumble or fall, they are finished for the race; there’s simply not enough time to recover, so they typically just stop. But over 40 kilometres, a marathoner can fall and – providing he or she is not injured – get up again, compete and possibly even win. When you’re investing for the long term, you have time to overcome “mishaps” in the form of market volatility. So instead of dropping out of the “race” and heading to the investment sidelines, stay invested in all types of markets. As you near retirement, and you have less time to recover from market downturns, you may need to adjust your portfolio to lower your risk level – but even then, you don’t need to call it quits as an investor.
Sprinters have to watch what they eat. But world-class marathoners have to be ultra-diligent about their diets, especially in the period immediately preceding a race. Because they must maximize the oxygen their bodies can use while running, they need a high percentage of their calories to come from carbohydrates, so they “carbo-load” when needed. When you invest, you also need to periodically “refuel” your portfolio so it has the energy and stamina needed to keep you moving forward toward your goals. And that means you must add dollars to those areas of your portfolio that need beefing up.
Regular reviews with a financial professional can reveal where these gaps exist.
As an investor, you can learn a lot from Olympic marathoners – so put this knowledge to good use.
Fraser Willson is a financial advisor and insurance agent for Edward Jones Investments. Based in Mississauga, he works closely with families and businesses, helping them achieve their investment objectives in an organized and disciplined manner.