Every fall, Chicago hosts one of the world’s biggest and most sought-after marathons. The runners have been training for months to get to the start line in hopes of making it all 26.2 miles intact. Like running a marathon, investing is a long game that requires tenacity, patience, discipline, and a long-term strategy to achieve one’s unique goals.
It All Starts With A Goal
The best runners start with a personal goal, whether it’s a specific pace, an overall time, or just crossing the finish line in one piece. Good investing also starts with a personalized goal, whether it’s saving for retirement, buying a home, or saving for a child’s tuition. If an investor doesn’t know what they’re investing for—or a runner doesn’t know what they’re running for—they are unlikely to meet their goals.
The Right Training Plan
Marathon runners train for months or even years before competing in their first race because it takes time and knowledge to train safely and effectively. Their nutrition, history with running, and risk of injury all play a role in how they train. Investors also need to do their research or else work with experts who know the industry in and out. The right investment strategy considers many personal factors like financial goals, timeline, and risk tolerance.
Spread out the Load
Training for a marathon doesn’t just involve running. Mixing running with swimming reduces the load on muscles and joints, strength training helps prevent injury, and cycling improves endurance while working different muscles.
The best investment plans are also diversified. Most portfolios include a mix of stocks and bonds, but there are myriad ways to diversify a portfolio. There are hundreds of ETFs catering to different industries, principles, sectors, and markets, as well as ETFs that provide consistent income. ETFs themselves are becoming more diversified to address multiple goals in one fund, such as structured outcome strategies. There are also non-stock assets like real estate, money markets, and hedge funds. When portfolios are diversified, investors can spread the load out for a potentially smoother path to their goals.
It’s a Marathon, Not a Sprint
So many new runners do too much too soon, resulting in an injury that sets back their training or burning out before they make it to the finish line. Sprint investors might similarly do too much too soon, chase big-name stocks, or try to time the market without knowing what they’re doing. Running, like investing, is all about being patient, prioritizing gradual progress, and trusting the process.
Benefits Beget Benefits
Training for a marathon builds fitness that makes each run feel easier and easier. Effort compounds on itself. Investing is the same. Returns compound on themselves over a long period of time so that investors can get more out than they put in. Sticking with a training plan for the duration of the training block can yield similar results as staying invested through the duration of the investment period.
Running Into Trouble
An injury during training or a steep hill at mile 25 can feel like a huge setback or an insurmountable wall to a marathon runner. It might even be bad enough to make them quit. But if they were to quit, they’d be losing out on the hard work it took to get them to that point. They certainly would never see the finish line. Long-term investors often experience setbacks like bear markets and dips, but it’s important not to panic and quit. The runner can probably overcome injury or make it over the hill just like the market has historically recovered as well.
Keeping an Even Keel
There are a lot of emotional ups and downs in running a marathon. There are incredible highs—it’s called a runner’s high for a reason—and there can be just as incredible lows as runners experience setbacks and self-doubt. But only the successful runners overcome their emotional and mental struggles. Emotion can also make a mess of an investment strategy, whether its fear on the downside or greed and euphoria on the upside. The savvy investor sticks to the plan without acting on emotional reactions to every headline or market move.
The Finish Line
Ultimately, running and investing are about following a plan to achieve one’s personal goals. Everyone’s journey might look different, but they likely only got there with tenacity, patience, discipline, and a long-term strategy.