- December 20, 2016
- Category: Investments
The analogy between stock market investing and marathon is very interesting. The qualities required to prepare & run a marathon and successful equity investing are very similar. If you love running and have prepared for a marathon, you would be able to relate to this comparison better.
Lets start with marathon first. Come 2017 and a string of marathon events are lined up in the beginning of the year across India. The number of people participating in these events is increasing by the year. Majority people take part in the short distance race just for the experience of it, they do brisk walk or occasional jogging to complete the race. Besides the professional athletes, there are ordinary participants who take part in the more arduous half & full marathons. These are not regular runners and maybe first time participants. It is not that they suddenly start running the long stretch one fine morning. They undergo intensive training, preparing months in advance for the D-day. The approach is to gradually build up on the energy levels by running short distances first. So, a participant would target to finish 3 km first over 1 week, then 5 km and so on. He gradually turns confident of covering long distances seamlessly. Remember, the focus here is not on winning the marathon but finishing it. He then shifts attention to the time factor, the shortest possible time in which to finish the race. He has a very clear goal in his mind and a proper plan to execute it, first by focusing on the distance and then the time frame. His success depends upon his disciplined approach to practice running regularly no matter the obstacles and the distractions and undergoing the ultimate test of endurance both at the physical and mental levels.
Investing in the stock markets for the long term is similar to preparing and running a marathon. Here are the qualities an investor can imbibe for successful investing from a marathoner:
- Be disciplined & ignore the noise:Just as a marathoner avoids distractions and doesn’t take a break in his practice sessions, an investor needs to adopt a similar disciplined approach. He should ignore the daily stock market gyrations and weed out the cacophony surrounding the macro economy and geo-political developments which influence it. What matters is just one fundamental fact – ‘How is the company’? Its management, ethics, products, market leadership, economic moat, profit margins, capital investment, debt management, etc. These are the things that really matter and eventually get reflected in the share price of a company. Rest is all noise! This approach would help an investor to think clearly, spot opportunities in volatile markets and go against the herd.
- Being patient to achieve a bigger goal: An investor needs to be patient and see the big picture, akin to the way a marathoner is focused on finishing the race. As the latter sets small goals to finish the big race, an investor needs to similarly focus on meeting his financial goals. He needs to regularly set aside small sums to target a big corpus for the future. Further, he should not deviate from the ultimate goal by getting tempted to book short term profits or selling in panic in a bear market. If he wants to strike gold in the long term, he needs to be patient and focused on his goals throughout the investment journey.
- Being aware of the risks: A marathoner is aware of how his body works and what are its limits. He would not take any unnecessary risks with his body causing stress and harm. Similarly, an investor needs to understand how stock markets work (need not be an expert) and is aware of the risks associated with it. Adequate knowledge will enable him to take calculated risks and investment decisions with conviction & confidence.
Investing is more of a mind game than it is about money. Investors having the right attributes as described above have better chances of finishing well down the road to riches just like a marathoner concludes his journey.
Wishing all our readers a Merry Christmas and Happy New Year!