In September, runners from across Britain will descend on Newcastle-upon-Tyne for the Great North Run. The world-famous half marathon will see 60,000 determined runners from across the globe cross the Tyne Bridge as they head for the finish line in South Shields.
If you’re going to be one of them, you’re a dedicated long-distance runner, or you know someone who is, you’ll be familiar with the commitment and focus that’s needed to succeed. What you may not have realised, though, is that there are some similarities between long-distance running and successful investing, especially when the stock market is as volatile as it has been in 2022.
Read on to discover three lessons that could help you become a savvier investor.
1. Know what your long-term goal is
Often, those taking part in long-distance races are looking to achieve a personal goal, whether that’s to complete a new distance or finish the course in a time that’s a personal best.
Ask any seasoned runner and they’re likely to tell you that focusing on your goal and not worrying about other runners is often key to meeting your own target.
While professional athletes may be concerned about the pace of their competitors, most long-distance runners prefer to remain focused on their own speed. Being concerned about other runners might result in them going quicker, for example, which may mean they run out of energy later and don’t complete the course.
This is broadly the same when investing, especially when the stock market is as nervous as it has been so far this year. Investing should never be about worrying what other investors might be thinking or doing, as this could result in you making a knee-jerk decision that hinders your progress towards your goals.
This is something we will look at more closely in a moment.
2. Focus on your goal when the going gets tough
Completing a half-marathon or marathon is about pushing through the impulse to stop. An experienced marathon runner will probably tell you that the middle of the race is notoriously difficult, as fatigue sets in and fear of not reaching the finish line takes hold.
It’s when runners are most likely to drop out of the race, which is why it’s often referred to as “hitting the wall”. Pressing on despite the immediate worry and discomfort is the only way to achieve the goal of completing the race.
This can be likened to times when the stock market is volatile. This uncertainty can prompt fears that your investments may not perform as initially hoped and that you might not achieve your financial goals.
Like running though, typically the best way to deal with the fear and discomfort is to press ahead, focus on your long-term goals, and remain invested when others around you quit.
To demonstrate this, consider the graph below, which shows the performance of the MSCI World index between 1 January 2021 and 31 December of the same year.
The index tracks the performance of a basket of companies across 23 developed nations across the globe.
As you can see from the value along the left-hand axis, the index rose significantly in value during the year, despite several major downturns along the way. If you had sold your investments during those downturns, you could have locked in the losses that you made and then missed out on the subsequent growth that followed.
Pressing on during mile 11 will be rewarded with your medal at the end!
3. Professionals will help you achieve your goals
The majority of marathon runners who are serious about their sport understand the importance of working with others to improve performance. Whether it’s consulting nutritionists to increase stamina through a better diet, or a personal trainer to build muscle to increase speed, working with specialists can help runners achieve their goals.
This is also true with investing. Working with a financial planner can help you get more from your investments as they will help you understand what’s happening with the stock market at any given moment.
Additionally, they can ensure that your investment portfolio is well diversified to help spread risk and potentially increase growth, and identify the possible opportunities a volatile market may provide. This can help you achieve your financial goals by increasing growth potential, and perhaps more importantly, ensuring you don’t make a decision you later regret.
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This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.