On October 1st, I completed my first half-marathon. I don’t consider myself a “runner” per se. I do enjoy running 6km under 30 minutes. It helps clearing my head and it gives me the kind of energy I need to go through my hard days of work. However, there is a world between running 6km and 21km! During my RV trip across Central America, I decided to register to a half-marathon in order to achieve another personal goal; I wanted to go outside my comfort zone once again. I had exactly 3 months to train for it. I’ve learned some important lessons through this experience. Let me share them and tell you how they can influence the way you manage your portfolio.
You can tell my wife is the real runner in the couple
#1 Make sure you have a training plan – Write down your investment strategy
At the same time I registered for the half-marathon, I also entered in the NYC marathon lottery. My wife thought I was crazy, but I knew that if I had won the opportunity to run through this beautiful city, I would just train accordingly.
Running a long distance is like saving money for your retirement. Don’t expect to make it happen shortly, focus on the long term. With a proper plan, you can achieve anything. I went after my running goal the same way as I planned my retirement: I put everything in writing. It took me a while to write down my investment strategy, but this was the most important part of my whole plan.
Each phase of your retirement plan should be outlined. How much you need to save per year, how you will build your portfolio and manage growth and how you will withdraw your money.
#2 Know why you are doing it – Highlight your investment thesis
In my case, the first 10km was an easy ride. I’ve done it several times and I never felt tired within the first hour of running. However, starting around the 13thkm, my left feet started to hurt. With 8km to go, this wasn’t the time to think about how hurt I was, it was time to think about why I was doing this. I remembered that I wanted to run with my wife and that I wanted to achieve this milestone. I wanted to prove myself I was good enough to run that long.
During your investment journey, you will make bad trades and your portfolio will hurt (let’s just hope it doesn’t collapse!). During those moments, you will be tempted to wonder if you should keep your holding or not. Seeing one of your holding going down by 10-20% will happen. Is it a reason to sell? Not necessarily. As my feet hurt, I knew this wasn’t dangerous or I wouldn’t be injured seriously. This is the same thing with your holding. If one company doesn’t do well, go back to your investment thesis. Review the reason why you have selected this business in the first place and make sure those reasons are still there. If you still believe in this company, if the fundamentals are still there, then you have no reason to quit. If you are unsure how to write your investment thesis, I offer you to read 16 examples here.
#3 Stay the course – Stick to your investment plan
After I accepted I was going to run the last 8km with my left feet hurting, I thought I was done with the surprises. However, starting on the 16th km, my both ankles started to hurt badly. During my training plan, I had completed a 17km run and didn’t feel a thing. In fact, the very next morning I was doing my 3rd best time for a 6km ever. But the half-marathon run was different and my body decided to fall apart at a very bad timing. The last 2km of the run was uphill (yeah, I’d like having two words with the guy who drafted the itinerary!). My legs were heavier than a concrete block and each step was killing my ankle slowly. I never stopped running nonetheless. I stayed the course and kept the same pace. Why? Because that was the plan and I didn’t give myself the right to turn around or stop.
I know many investors fear the next market correction. Some think it will be worse than 2008. They may be right, maybe your portfolio will collapse by 50% and we will all cry together on this blog. But what are you going to do about it? As I knew it was a possibility that I would hurt during my run, I didn’t know if it was going to happen and how bad it would be. However, I knew that I had to keep going to finish. This is the same with your investments. If you want to retire wealthy, the only thing you must do is to keep your money invested. It’s not by earning 1% on the sideline that you will grow something. You must stick to your investment plan and keep investing no matter if this hurt.
The main reason of failure for both running and investing
Throughout my career as a financial planner, I’ve met with several investors who lost money. Many of them blamed their advisor or the market for their problems. However, the main reason why they failed wasn’t poor advices or crazy fluctuation. The main reason why they failed was a lack of an investment plan. A plan will tell you how to reach your goal. It will also comfort you when you have doubts. Most importantly, when you really don’t know what to do because it is all going wrong, it will be your lifeline to stick to it. By following a strong plan, you are 100% sure to reach retirement with enough money on hand.
Running 21km wasn’t easy for me. But I succeeded because I had a plan and I followed it. You can do exactly the same with your portfolio.