I am at the final stages of preparation for Ironman Barcelona as I write this. Ironman is the fancy name of long-distance triathlon that consists of a 2.4-mile (3.8 km) swim, a 112-mile (180 km) bicycle ride, and a 26.22-mile (42.2 km) marathon run raced in that order and without a break. This will be my second long-distance triathlon race and I have gained some valuable insights along the way into how the characteristics that are required for success in long-distance endurance sports and long-term investing are strikingly similar.
I bet most of you didn't know that reputable value investor Peter Cundill could run a marathon in under 3 hours even past his young years. Also, did you notice anything special about Warren Buffett's 2012 letter to shareholders? That's the one in which he highlights that Berkshire has a lot of home-grown talent when it comes to sports: Ted Weschler, one of the younger investment managers has run the marathon in 3:01, while his colleague Todd Combs specializes in triathlon. I believe it is not pure happenstance that some well-known investors are involved in endurance sports, so I'd like to share with you some of the parallelisms and revelations that came to me during those 20-hour training weeks. Consider this a special edition of the opening section that may give you some food for thought without requiring that you put in the grueling work.
Let's start with the hidden element! Do you think that triathlon consists of only three parts that are swim, bike, and run? Wrong. It's humanly impossible to cross the finish line of an Ironman without following a good race nutrition protocol. This is the hidden element that the more spectacular parts cannot work without, and this field is much more complex than you might imagine. We also have such a crucially important invisible factor in investing: that is psychology. Anyone can crunch the numbers and do some kind of valuation but most investors let their inborn biases sabotage their success. Psychology may not sound too exciting but it still makes up about 90% of the success equation when it comes to investing!
How well can you endure monotony? Running 50+ laps on the track and cycling 90+ laps on a short flat track were part of my preparation. While my friends say that they would go crazy if they had to do this, I usually have a great time during these training sessions. I can either switch off mentally and relax or direct my thoughts at something that I want to delve deep into. There's nothing fancy about an Ironman preparation just like there is nothing fancy about sensible investing. You don't change the strategy week in week out just to get some excitement and you must be prepared to stick with the boring stuff even when all the others seem to be having a great time. (The boring stuff refers to our hardly changing Top 10 of undervalued quality stocks in this overheated market while the excitement seems to be mostly in the tech sector these days.) Enduring monotony is absolutely essential to becoming a successful investor, chasing fads is detrimental to your wealth.
What about pain? In my experience, every big goal in life that is worth pursuing keeps asking along the way how bad you want it. Nothing comes easy and the excuse to give up lurks around every corner. Let me be as straightforward at this point as possible: you will have to endure suffering along the way to financial freedom. Neither sporting nor financial success can be achieved without pain. Only those of you who can keep buying the out-of-favor quality stocks when there's blood in the streets will reach their goals. This is easier said than done, don't say I didn't warn you! Btw. Columbia's value investing course also teaches that those investors who can endure the most suffering will become the most successful. I believe that I am mentally tougher than most people and I often experience this at both triathlon races and stock investing. Sebastian Kienle, winner of the 2014 Ironman World Championship puts it this way "If it's hurting me, it's killing them." When it starts to really hurt me, the market has already fallen apart and others have capitulated.
If you have ever seen a chart illustrating the power of compounding, you must have noticed that nothing spectacular happens in the first few years. This means that regardless of the almost invisible progress that you make, you need to keep up the work of saving and investing your money following your evidence-based system. Patience and discipline are needed just like with an Ironman preparation during which you put in the work every single day only to notice some minor progress on a monthly basis, at best. My first Ironman project has taught me to work hard every day for a goal that was so huge and distant that it seemed unachievable (for a guy like me who could barely swim and ride a bike). Setting challenging goals and breaking them down to small enough pieces that your mind can handle are part of both the sporting and investing journey. Don't let the big goal frighten you! You can always save an additional 100 dollars just like you can swim a few meters to reach that next buoy. Focus on the next milestone, put in the work, and you will achieve that impossible goal faster than you could imagine.
We are judged by what we finish, not what we start. Starting strong is meaningless if you cannot keep up the pace thus end up quitting halfway through the race. Do you think it's easy to find your own pace and stick to it no matter what the others are doing on the race track? Think twice! Just like it is incredibly hard not to deviate from your investment plan when others are getting rich with seemingly ridiculous speculative bets, it also requires discipline not to follow the crowd at a race. My first competitive marathon has taught me this lesson in an unforgettably painful way. Since finishing strong is the name of the game, it is not the entry dividend yield that you should focus on with your long-term investments just like it is not the pace of your first mile in a marathon that really matters. Know your sustainable pace, have a plan, and stick to that plan no matter what!
You will only achieve your big goals if you learn to enjoy the way that leads to them. Yes, it will involve pain and suffering but it also gives you the chance to get to know your true self. There's a saying that "Triathlon doesn't build character. It reveals it." Keep monitoring your state of mind and you can learn so much along the way that the race itself becomes a celebration of all your efforts and accomplishments. At least this is how I am looking forward to Barcelona. Your investment journey will also serve as a mirror that won't do you any favors in the form of positive distortions. Are you prepared for what you'll see?
No matter what your goals are you must take 100% responsibility for all your actions and stop blaming circumstances outside your control. Those circumstances may affect others as well, it's your reactions that determine your results. No excuses, you have to keep moving, "this marathon will not run itself" as I usually say when I am not willing to stop regardless of how I feel. Setbacks do happen (like technical issues on the bike course or unexpected dividend cuts in your portfolio), it's up to you to make the most of them, learn the lessons and come back stronger. If you have the determination and perseverance then you can become financially free, an Ironman or whatever you set your sights on. It's only a matter of time.
The key is to set the proper goals in your life since you can have anything you want but you cannot have everything! (Now read this again, please.) You'll need to prioritize and after having your clear number one goal, it is wise to learn from someone who has already done what you are aiming for. This approach lets you proceed towards that goal on a somewhat less bumpy road at a higher than normal speed. This is exactly what the FALCON Method newsletter is intended to help you with when it comes to your investments and this is why I am following a training plan created by a professional triathlete with my Ironman preparation. Once you cross the finish line (achieve financial freedom that is) you'll realize that what you have learned and experienced along the way is much more valuable than reaching the goal itself. That knowledge is yours to keep forever and you can share it for the benefit of your loved ones. The journey is the destination as they say. Now that this special intro is coming to an end, it is time to stop wishing for that goal and start working for it. Let's see what the FALCON spots this time!
The race is over by now and almost everything went as planned. I am satisfied with my finish time and looking forward to learn more from my next adventure.
The FALCON Method is a stock selection process that serves the construction of a buy-and-hold portfolio with both an income and total return focus. The model is about 90% quantitative and 10% qualitative. If you are curious how this evidence-based stock selection process works, click here to see its steps and the factual evidence behind them.
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.