With marathon season in full swing this got us thinking about the investment process, and how there are many comparisons to be drawn between running a marathon and being a successful, long term investor. Here we look at some of the similarities.
Nobody can decide to run a marathon, for the first time, the next day. Firstly, there will be a decision-making process and an agreement to commit to the training required. Then comes the weeks and months of training – often to the sacrifice of other elements of everyday life.
Before investing for a client, we will always undergo a decision-making process, working with them to create a realistic plan to achieve their goals and objectives. Investments don’t bear fruit overnight and although a sprint race is exciting, the shorter investment period is more akin to a gamble compared to when it is stretched over 10 years. It takes commitment, dedication and sometimes sacrifices to achieve long-term financial goals.
For most people, running a marathon will involve mental fitness as well as the physical endurance to go the full distance. Similarly, a degree of mental resilience is required for a long-term investor as periods of market downturns may result in investors becoming uneasy. Whilst there will always be the temptation to retreat to cash, this will often result in missing out on future market upturns. The sprinting, short term investor will panic in market downturns, be elated in market upturns and switch tactics mid-course. However, staying the distance when conditions get tough is key to successful investing.
Nobody should expect to run a marathon quickly; even those in peak physical fitness should have a realistic expectation of time. As an investor, timing the peaks and troughs of markets is notoriously difficult, but time in the markets is easier to achieve. Successful investors often leave their investments in place for many years, continuing to fund them even when the going gets tough. This not only positions investors well for when the market recovers, it also allows for compound interest to work its magic year on year.
Our financial advisers work with clients throughout their financial journey – helping them to put a plan in place and adapt this to their changing circumstances and objectives. To discuss how our financial advisers can work with you on your financial journey, please get in touch.